Compound Interest – Varying rates across years: Find the compound interest on ₹ 9,375 in 2 years when the rate is 2% for the first year and 4% for the second year (annual compounding, rate changes per year).

Introduction / Context:When rates vary by year, we apply each year’s multiplier sequentially. The amount after 2 years is P * (1 + r1) * (1 + r2); CI is amount minus principal.

Given Data / Assumptions:

• P = ₹ 9,375
• Year-1 rate r1 = 2% = 0.02
• Year-2 rate r2 = 4% = 0.04

Concept / Approach:Amount A = 9375 * 1.02 * 1.04. Compound interest CI = A − 9375.

Step-by-Step Solution:A = 9375 * 1.02 = 9562.50A = 9562.50 * 1.04 = ₹ 9,945.00CI = 9945 − 9375 = ₹ 570

Verification / Alternative check:The order of yearly multipliers does not change the 2-year result (commutative multiplication).

Why Other Options Are Wrong:₹ 670/₹ 760/₹ 770 imply higher rates or additional years.

Common Pitfalls:Adding rates (2% + 4% = 6%) and applying simple interest, which ignores compounding.

Final Answer:₹ 570