Compound Interest – Find interest (not amount) on ₹ 50,000 in 3 years at 12% p.a.: What is the compound interest accrued on ₹ 50,000 after 3 years at 12% per annum (annual compounding)?

Introduction / Context:
This question asks for the compound interest amount (A − P), not the final amount A. After computing the 3-year compounded amount at 12% per annum, subtract the principal to get the interest earned over the period.

Given Data / Assumptions:

• P = 50,000
• r = 12% per annum
• t = 3 years, annual compounding

Concept / Approach:
Compute A = P * (1 + r)^t = 50,000 * (1.12)^3. Then CI = A − P. Avoid confusing the final amount with the interest component.

Step-by-Step Solution:
(1.12)^2 = 1.2544; (1.12)^3 = 1.404928A = 50,000 * 1.404928 = 70,246.40CI = A − P = 70,246.40 − 50,000 = 20,246.40

Verification / Alternative check:
You can also build year-by-year: Year 1 interest = 6,000; Year 2 interest = 6,720; Year 3 interest = 7,526.40; Total = 20,246.40. This equals A − P as above.

Why Other Options Are Wrong:
₹ 70,246.40 is the final amount, not the interest; ₹ 80,000 and ₹ 70,000 are not relevant to the computed CI; ₹ 18,000 underestimates the compounded effect over three years at 12%.

Common Pitfalls:
Answering with the amount instead of interest is common. Read carefully: “compound interest on” means A − P, not A.

Final Answer:
₹ 20,246.40