Compound interest for 2 years at 10% per annum is computed using the amount formula A = P(1 + R/100) raised to the power of time. Here, A = 10,000 × (1 + 10/100)² = 10,000 × (1.1)². The value of (1.1)² is 1.21, so the amount becomes 10,000 × 1.21 = 12,100. The compound interest is the amount minus the principal, which is 12,100 − 10,000 = ₹2,100.
Option A:
Option A, ₹1,000, equals simple interest for one year at 10% but fails to account for the interest-on-interest effect in the second year. It underestimates the total interest earned over two years.
Option B:
Option B, ₹2,000, corresponds to simple interest over two years (10% each year on the principal only), but compound interest is slightly higher because the second year’s interest is also earned on the first year’s interest.
Option C:
Option C correctly derives the amount using the compound interest factor (1.1)² and subtracts the original principal. This procedure captures the compounding process and yields the slightly larger interest of ₹2,100.
Option D:
Option D, ₹2,200, overstates the effect of compounding and would require a higher effective rate or more time than actually given in the problem.
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