Question 142

A man invests Rs. 5000 for 3 years, at 5% p.a. compound interest reckoned yearly. Income tax at the rate of 20%on the interest earned is deducted at the end of each year. Find the amount at the end of the third year.

Solution

Rate of interest = 5% and income tax rate on interest = 20%

=> 80% of interest is added for next year principal

Now effective rate of interest = 80% of 5% = $$4\%$$ Principal sum = Rs. 5000 and time = 3 years

$$\therefore$$ Amount under compound interest = $$P(1+\frac{r}{100})^t$$

= $$5000\times(1+\frac{4}{100})^3$$

= $$5000\times\frac{26}{25}\times\frac{26}{25}\times\frac{26}{25}$$

= $$17576\times\frac{8}{25}=Rs.$$ $$5624.32$$

=> Ans - (A)


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