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

Introduction / Context:
This is a straightforward compound interest calculation where the principal, rate, and time are given, and we are asked to find the maturity amount. Such questions appear frequently in banking and aptitude exams, and they build comfort with the basic compound interest formula. The scenario of a fixed deposit investment makes the question realistic and helps you connect the mathematics with everyday financial decisions.

Given Data / Assumptions:

• Principal P = Rs 8000
• Annual rate of interest r = 5% per annum
• Time period n = 2 years
• Interest is compounded annually
• We need to find the maturity amount A

Concept / Approach:
With annual compounding, the amount after n years is given by A = P * (1 + r)^n, where r is written as a decimal. Here r = 5% = 0.05 and n = 2. The calculation is simple because we only have two years and a small percentage. Once we compute A, we can cross check by computing the interest year by year. The maturity amount already includes both the original principal and the compound interest earned.

Step-by-Step Solution:
P = 8000, r = 5% = 0.05, n = 2 years Formula: A = P * (1 + r)^n A = 8000 * (1 + 0.05)^2 A = 8000 * 1.05^2 1.05^2 = 1.05 * 1.05 = 1.1025 A = 8000 * 1.1025 = 8820 So the maturity amount is Rs 8820

Verification / Alternative check:
We can verify by calculating year by year. At the end of the first year, interest earned is 8000 * 0.05 = 400, so the amount becomes 8400. At the end of the second year, interest is 8400 * 0.05 = 420. Adding this to 8400 gives 8400 + 420 = 8820. This matches the amount obtained from the formula, confirming that the calculation is correct.

Why Other Options Are Wrong:
Rs 8600 would correspond to an incorrect or lower interest calculation where compounding is ignored or calculated only once. Rs 8830 and Rs 8500 do not match the result of any correct application of a 5% annual compound rate on Rs 8000 for 2 years. Only Rs 8820 agrees with both the formula and the year by year calculation.

Common Pitfalls:
A common mistake is to use the simple interest formula P * r * t and then add the result to the principal without considering compounding on the first year interest. Another error is to forget to square the factor (1 + r) when n = 2, and instead multiply by it only once. Writing the formula carefully and performing each step methodically helps avoid these mistakes.

Final Answer:
Albert will receive a maturity amount of Rs 8820 after 2 years at 5 percent compound interest per annum.