Question

Find the compound interest on rs 32,000 at 20% per annum for 1 year, if the interest is compounded quarterly

Answer 1

The important thing here to notice is the interest is compounded quarterly and not annually .Basically we do mostly all questions where interest is compounded annually .So we are getting  the interest 4 times in a year after every 3 months.

A = P ( 1 + R/t )^nt and C.I. = A – P

Thats the old school formula for calculating CI

A =Amount          R = Rate = 20% = 0.2               P = Principal = 32000

n = time = 1             t = number of times the interest is compounded = 4

A = 32000(1 + 0.2/4)^4

A = 32000(1 + 0.05)^4

=32000(1.05)^4

=32000(1.21)

=38720

Now ,CI = A - P

38720 - 32000

6720 approx