An amount of Tk. 25000 in 2 years at compound interest compounded annually, if the interest rate for the successive years be 4% and 5% per annum respectively, is-

Question: An amount of Tk. 25000 in 2 years at compound interest compounded annually, if the interest rate for the successive years be 4% and 5% per annum respectively, is-

Solution:
Principal (P) = Tk. 25000
Interest rates:
4% for the 1st year
and 5% for the 2nd year
Time (t) = 2 years

Amount for the first year: A₁ = P(1 + r₁/100)
Amount for the second year: A₂ = A₁(1 + r₂/100)

A₁ = 25000(1 + 4/100)
⇒ A₁ = 25000 × 1.04
⇒ A₁ = 26000

A₂ = 26000(1 + 5/100)
⇒ A₂ = 26000 × 1.05
⇒ A₂ = 27300

∴ The correct answer is option 1.