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    If the interest earned during the 2nd year on a certain sum is ₹2,352, and the rate of interest is 5% per annum compounded annually, then the sum is:
    Question

    If the interest earned during the 2nd year on a certain sum is ₹2,352, and the rate of interest is 5% per annum compounded annually, then the sum is:

    A.

    ₹44,035

    B.

    ₹44,855

    C.

    ₹44,800

    D.

    ₹45,115

    Correct option is C

    Given:

    Interest earned in the 2nd year = ₹2352

    Rate of interest = 5% per annum, compounded annually

    Concept Used:

    Interest of the 2nd year in compound interest = Amount after 2 years − Amount after 1 year

    This equals:

    CI2nd = P(1+r)r

    Solution:

    Amount after 1 year = P(1.05)

    Amount after 2 years = P(1.05)2

    Interest in 2nd year:

    P(1.05)2 - P(1.05) = P(1.05)(0.05) = 2352

    P =  23521.05×0.05\frac{2352}{1.05 × 0.05}​​

    P = 23520.0525 \frac{2352}{0.0525}​ = ₹44800

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