Find the compound interest when principal =Rs. 50000, rate= 10% p.a. and time = 3 years.
Find the amount payable at the end of 3 years.
Answers
Solution!!
The concept of compound interest (CI) has to be used here. The principal, rate of interest and time is given in the question. According to the question, we have to find the compound interest and the amount.
We can do it with formula and without the formula.
Let's do it with the formula first.
Principal (P) = Rs 50,000
Rate of interest (R) = 10%
Time (n) = 3 years
Amount = P(1 + (R/100))ⁿ
Amount = 50000(1 + (10/100))³
Amount = 50000(110/100)³
Amount = 50000(11/10)³
Amount = 50000 × (1331/1000)
Amount = 50 × 1331
Amount = Rs 66,550
CI = Amount - Principal
CI = Rs 66,550 - Rs 50,000
CI = Rs 16,550
Now, let's do it without using the formula.
First year:-
Principal (P) = Rs 50,000
Rate of interest (R) = 10%
Time (T) = 1 year
SI = (P × R × T)/100
SI = (50,000 × 10 × 1)/100
SI = 500 × 10
SI = Rs 5000
Amount = Principal + SI
Amount = Rs 50,000 + Rs 5000
Amount = Rs 55,000
Second year:-
The amount in the first year becomes principal in the second year.
Principal (P) = Rs 55,000
Rate of interest (R) = 10%
Time (T) = 1 year
SI = (P × R × T)/100
SI = (55,000 × 10 × 1)/100
SI = 550 × 10 × 1
SI = Rs 5500
Amount = Principal + SI
Amount = Rs 55,000 + Rs 5500
Amount = Rs 60,500
Third year:-
The amount in the second year becomes the principal in the third year.
Principal (P) = Rs 60,500
Rate of interest (R) = 10%
Time (T) = 1 year
SI = (P × R × T)/100
SI = (60,500 × 10 × 1)/100
SI = 605 × 10 × 1
SI = Rs 6050
Amount = Principal + SI
Amount = Rs 60,500 + Rs 6050
Amount = Rs 66,550
CI = Amount - Principal
CI = Rs 66,550 - Rs 50,000
CI = Rs 16,550
Abbreviations used:-
P → Principal
R → Rate of interest
T or n → Time
SI → Simple interest
CI → Compound interest