Find the compound interest on rs 600 for 2 years at 5 per annum compounded annually
Answers
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Answer:
The compound interest on rs 600 for 2 years at 5% per annum compounded annually is rs 61.5
Explanation:
The compound interest formula is as follows:
A = P ( 1 + r/n) ⁿᵇ
Where Amount accrued after given years
P is the amount borrowed/lend
r the interest rate (in decimal)
n = number of times compounded per year
b = number of years
In this question:
A = ?
P = rs 600
r = 0.05 (5% in decimal)
n = 1 ( annually, meaning once in a year)
b = 2 years
Input the figures in the compound interest formula and find the compound interest as follows:
A = P ( 1 + r/n) ⁿᵇ
A = 600 ( 1 + 0.05/1) ¹ˣ²
A = 600 (1 + 0.05)²
A = 600(1.05)²
A = 600 × 1.1025
A=661.5
Therefore the amount accrued is rs 661.5
Subtract the principal which rs 600 from the amount accrued to find the compound interest.
Compound interest = 661.5 - 600
= rs 61.5