# What Will be The Interest?

If the first year’s interest on a certain sum of money placed at 5% per annum compound interest is Rs.1200, What will be the interest for the 3rd year?

- Rs. 1220
- Rs. 1323
- Rs. 1423
- Rs. 1330

**Answer: (2) Rs.1323**

**Explanation:-**

Let the principal be Rs.X.

Given-

Rate = 5 %, Compound Interest = Rs.1200, time = 1 year.

**Formula-**

**Simple Interest = P x R x T/100**

**Where, P = principal , R = rate, & T = time.**

Then, 1200 = X x 5 x 1/100

1200 = X/20

X = 1200 x 20

X = Rs.24000

The principal is Rs.24000

Then, the amount of first year = 2400 + 1200

= Rs.25200

Principal for second year = Amount of first year

Then. the Compound Interest of second year

= 25200 x 5 x 1/100

= 252 x 5

= Rs.1260

The amount of second year = 25200 + 1260

= Rs.26460

The amount of second year = the principal of third year

Then, the compound interest of third year = 26460 x 5 x 1/100

= RS.1323

Hence the answer is (2) Rs.1323.