Calculate the amount due and compound interest on Rs.7500 for 2yrs when the rate of interest for successive years is 5% and 4% respectively.
Answers
Solution!!
The concept of compound interest has to be used here. The principal, time and rate of interest are given in the question. We are asked to calculate the amount and the compound interest.
First year:
Principal = Rs 7500
Rate of interest = 5%
Time = 1 year
SI = (P × R × T)/100
SI = (7500 × 5 × 1)/100
SI = 75 × 5 × 1
SI = Rs 375
Amount = Principal + SI
Amount = Rs 7500 + Rs 375
Amount = Rs 7875
Second year:
The amount in the first year becomes the principal in the second year.
Principal = Rs 7875
Rate of interest = 4%
Time = 1 year
SI = (P × R × T)/100
SI = (7875 × 4 × 1)/100
SI = 31500/100
SI = Rs 315
Amount = Principal + SI
Amount = Rs 7875 + Rs 315
Amount = Rs 8190
CI = Amount in second year - Principal in first year
CI = Rs 8190 - Rs 7500
CI = Rs 690
Abbreviations used:
P → Principal
R → Rate of interest
T → Time
CI → Compound interest
SI → Simple interest