Question

Calculate the compounded interest on Rs. 5,00,000 at 4% per annum for 2 years, compounded annually .​

Answer 1

A = P(1 + r/100)^t

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

= 500000(1+4/100)^2

= 500000×26×26/25×25

=540800

C.I.=amount-principal

=540800-500000

=₹40800

Answer 2

Given:

✰ Principal ( P ) = Rs. 500000

✰ Rate ( r ) = 4%

✰ Time ( n ) = 2 years

To find:

✠ Compound interest ( C.I. )

Solution:

First we will find the amount when the interest is compounded yearly by using formula. Putting the values in the formula and then doing the required calculations. The difference between the final amount and the original principal is the required compound interest. Like this, we will find the compounded interest for 2 years.

When the interest is compounded yearly, the formula for finding amount:

✭ A = P( 1 + r/100 )ⁿ ✭

Where,

• A = Amount;
• P = Principal;
• r = Rate of interest compounded yearly.
• n = Number of years.

Putting the values in the formula, we have:

➛ A = 500000( 1 + 4/100 )²

➛ A = 500000( (100 + 4)/100 )²

➛ A = 500000 × ( 104/100 )²

➛ A = 500000 × 104/100 × 104/100

➛ A = 50 × 104 × 104

➛ A = 50 × 10816

➛ A = Rs. 540800

Then, finally we will find the compound interest. The difference between the final amount and the original principal is the required compound interest.

➤ C.I. = A - P

Where,

• C.I. = Compound interest
• A = Amount
• P = Principal

Putting the values, we have:

➤ C.I. = 540800 - 500000

➤ C.I. = Rs. 40800

∴ The required compound interest ( C.I. ) = Rs. 40800

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