To solve this problem, we use the formula:

$S = a(1 + r)^n$

where:

• $a = 1000$ (present value of one share of the stock),
• $r = 0.05$ (increase rate per year, as 5% is converted to decimal),
• $n = 2$ (the time in years).

Substituting these values into the formula:

$S = 1000 \times (1 + 0.05)^2$

Calculating step-by-step:

1. Calculate $1 + r$: $1 + 0.05 = 1.05$

2. Raise $1.05$ to the power of $2$: $(1.05)^2 = 1.1025$

3. Multiply by the initial value: $S = 1000 \times 1.1025 = 1102.5$

Therefore, the value of one share of the stock two years from now is ₹1102.5.

The correct answer is:

• ₹1102.5

Would you like further details on this calculation, or do you have any other questions?

Here are 5 related questions you may find interesting:

1. What would the value of the stock be after 5 years at the same growth rate?
2. How does changing the growth rate to 6% impact the stock value after 2 years?
3. What is the formula to calculate compound interest for different compounding periods?
4. How would the answer change if the stock decreased by 5% annually instead?
5. How do we calculate the effective annual growth rate when compounding monthly?

Tip: Understanding how to apply the compound interest formula is crucial for calculating investments or savings over time.