(1) Find the compound interest if ₹4000 are invested for 3 years at the rate of 12.5 p.c.p.a.
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Solution :
Principal ( P ) = Rs 4000
Rate of interest ( r ) = 12½ % = 25/2 %
Duration ( n ) = 3
Amount ( A ) = P( 1 + r/100 )ⁿ
A = 4000 ( 1 + 25/200 )³
A = 4000 ( 1 + 1/8 )³
A = 4000 × ( 9/8 )³
A = Rs 5695.31
Therefore ,
Compound Interest = A - P
= Rs 5695.31 - Rs 4000
= Rs 1695.31
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