Albert invests an amount of Rs. 8000 in a fixed deposit scheme for 2 years at compound interest at the rate of 5% per annum. What amount will he receive on maturity of this fixed deposit?

Introduction / Context:
This question is a straightforward application of the compound interest formula for a fixed deposit scheme. It checks your ability to compute the maturity amount when the principal, rate of interest, time period, and compounding frequency are clearly given. Such problems are very common in bank exams and basic financial mathematics.

Given Data / Assumptions:

• Principal P = Rs. 8000
• Rate of interest r = 5% per annum
• Time T = 2 years
• Compounding is annual
• We need to calculate the amount (maturity value) after 2 years

Concept / Approach:
The amount A at compound interest for annual compounding is given by:
A = P * (1 + r / 100)^TAfter finding the amount, we do not need to separately calculate the interest because the amount already includes principal plus interest. Here all values are simple, so direct substitution gives the answer.

Step-by-Step Solution:
Step 1: Write the formula.A = 8000 * (1 + 5 / 100)^2Step 2: Simplify the rate term.1 + 5 / 100 = 1 + 0.05 = 1.05Step 3: Square the factor.(1.05)^2 = 1.1025Step 4: Multiply by the principal.A = 8000 * 1.1025 = Rs. 8820

Verification / Alternative check:
We can verify year by year. At the end of the first year:
Amount after year 1 = 8000 + 5% of 8000 = 8000 + 400 = 8400At the end of the second year, interest is 5% on 8400:
Interest for year 2 = 5% of 8400 = 0.05 * 8400 = 420Amount after year 2 = 8400 + 420 = Rs. 8820This matches the formula based answer.

Why Other Options Are Wrong:
Rs. 8600 and Rs. 8500: These ignore the effect of interest in the second year on both principal and first year interest.Rs. 8830: Slightly higher, probably due to rounding errors or using an incorrect rate.Rs. 8800: A rounded guess rather than the exact computed value.

Common Pitfalls:
Learners sometimes treat this as simple interest and compute 5% for 2 years on the original principal only, which would give 8000 + 800 = 8800. Another error is forgetting to square the factor (1.05) for 2 years. Remember that with compound interest, each year the amount multiplies again by (1 + r / 100).

Final Answer:
The maturity amount Albert receives from the fixed deposit is Rs. 8820.