X invested an amount of Rs. 16000 in a fixed deposit for 2 years at a compound interest rate of 12% p.a. How much amount will he receive at maturity?

1. A

   Rs. 19,200

2. B

   Rs. 17,920

3. C

   Rs. 18,540.6

4. D

   Rs. 20,070.4

Appeared in: DSSSB - 29 August 2019 (Shift-1)

Explanation

• The problem requires calculating the future value of an investment with compound interest.
• The formula for the final amount (A) is A = P(1 + r/100)ⁿ, where P is the principal, r is the annual rate, and n is the time in years.
• Given P = 16,000, r = 12, and n = 2.
• Substituting the values: A = 16,000 * (1 + 12/100)².
• Calculation: A = 16,000 * (1.12)² = 16,000 * 1.2544 = 20,070.4.

Why Other Options Were Wrong

• Option A: This amount is incorrect and does not correspond to either simple or compound interest calculations for the given period. It might be the result of an arbitrary calculation error.
• Option B: This is the amount accumulated after only the first year (16,000 * 1.12 = 17,920). The question asks for the amount after two years.
• Option C: This amount is a result of a calculation error. It does not align with the correct application of the compound interest formula.

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Clinical Relevance

• Nursing practice connection: This is primarily an exam-oriented knowledge point with limited direct bedside application, so retain Calculation of maturity amount using the compound interest formula as background academic context rather than a clinical decision trigger.
• Understanding compound interest is a fundamental aspect of financial literacy, crucial for personal financial planning.
• For nursing professionals, this knowledge is vital for managing savings, planning for retirement, and making informed investment decisions for long-term financial security.
• What if the interest was compounded semi-annually? The number of compounding periods (n) would become 2*2=4, and the rate (r) for each period would be 12/2=6%. The formula would be A = 16000 * (1 + 6/100)⁴, resulting in a higher maturity amount (Rs. 20,199.60), demonstrating the power of more frequent compounding.

How to Approach the Question

• First, identify the type of problem. This is a direct application of the compound interest formula.
• Identify all the given variables from the question: Principal (P), rate of interest (r), and time period (n).
• Recall the correct formula for compound interest: A = P(1 + r/100)ⁿ.
• Substitute the identified values into the formula.
• Perform the calculation carefully, paying attention to the order of operations (parentheses, exponents, multiplication).
• Compare your final calculated amount with the given options to find the correct answer.

Concept Tested & Keywords

• Concept Tested: Calculation of maturity amount using the compound interest formula.
• Stem keywords: invested, Rs. 16000, fixed deposit, 2 years, compound interest, 12% p.a.
• Lead-in keywords: How much amount
• Negative lead-in flag: false

Question ID

Qw9lIVmM9ZajXM-7Cz_G1V

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