Question

How much interest does a Rs. 10,000 investment earn at 5% over 10 year?
A. 5000
B. 10000
C. 15000
D. 25000

Answer 1

Hint: Interest can be calculated by multiplying the original money invested with interest percentage and total span of the lease. 5% means 5/100.In the question, there is no mention of type of interest i.e. simple interest or compound interest. So, calculate simple interest by default.

Complete step-by-step answer:
 Simple interest is calculated as $ \dfrac{{PTR}}{{100}} $ where P is principal amount, T is time span and R is the rate of interest.
We are given that the money invested is Rs. 10,000 and the interest rate is 5%. The time span is 10 years.
Interest= $ \dfrac{{PTR}}{{100}} $ where P is the principal amount, T is the time duration or time span and R is the rate of interest.
As given in the question, principal amount P= 10,000; T= 10 years, R= 5
Interest= $ \dfrac{{PTR}}{{100}} $
  $
   = \dfrac{{10,000 \times 10 \times 5}}{{100}} \\
   = \dfrac{{500000}}{{100}} \\
   = 5000 \\
  $
Therefore, from among the options given in the question Option A is correct. For an investment of Rs. 10,000 with 5% rate of interest over 10 years, Rs. 5000 is the interest.
So, the correct answer is “Option A”.

Note: Simple interest is calculated on a loan or an investment. Compound interest is not the same as Simple interest. Compound interest is based upon the principal amount and the interest accumulates with it time to time which means it varies and increases. So do not confuse Compound interest with Simple interest.