how much will 50000 amount in 1 year 8 months at the interest rate 9% pa compounded annually
Answers
The formula for calculating compound interest is A = P (1 + r/n) ^ nt
For this formula, P is the principal amount, r is the rate of interest per annum, n denotes the number of times in a year the interest gets compounded, and t denotes the number of years.
In order to understand this better, let us take the help of an example:
Sania made an investment of Rs 50,000, with an annual interest rate of 10% for a time frame of five years. With compound interest calculated on it, the interest for the initial year will be calculated on the below mentioned basis: 50,000 x 10/100 = Rs. 5,000
Similarly, the interest for Sania’s second year will be calculated on the accumulated amount, i.e: 50,000 + 5000 = 55,000
Hence, the interest for the second year will be calculated on this basis: 55,000 (which is 50,000 plus 5,000) x 10/100 = Rs. 5,550
Similarly, the interest for the third year will be calculated on this basis: 50,000+5,000+5,550 = Rs. 60,550*10/100 = Rs. 6055
Moving forward with a similar calculation, the interest for the fourth year for Sania’s initial investment of Rs 50,000 will be calculated on this basis:
50,000+5,000+5,550+6055 = Rs. 66,605 *10/100 = 6,660.5
The final interest for the fifth year will be
50,000+5,000+5,550+6055+6,660.5 = Rs. 73265.5*10/100 = Rs. 7,326.55
Thus, we see that with the power of compounding, Sania has earned a substantial interest of
5,000 + 5,550 + 6055 + 6,660 + 7,326.55= Rs 30,591.55
Hence, Sania’s total investment after a period of five years has amounted to
Rs 50,000 + Rs 30,591.55 = Rs 80,591.55
Compound Interest V/S Simple Interest: How the final amount varies
With the help of the compound interest formula and calculator, we see that the interest that Sania has earned on her initial investment is quite substantial. However, what if her investment would have earned simple interest? Let us see how different the scenario would have been if simple interest would have been calculated on her investment:
The formula for calculating simple interest is: P * R * T / 100.
Here P denotes the principal amount, R is the interest rate and T is the time frame.
For Sania’s investment of Rs 50,000, the interest will be calculated on this basis:
Rs 50,000*10*5/100 = Rs 25,000
The total investment amount would have come in at Rs 50,000 + Rs 25,000 = Rs 75,000
Through this simple example, we see that the final return will be higher if the interest calculated is compounded.
Calculating compound interest charged on borrowings
With the help of the compound interest calculator, you can not only calculate the interest on an annual basis, but also make calculation for various time frames such as those charged on your borrowings or credit card. Here is an example of how compound interest will affect your daily borrowing:
Let us again take the example of Sania here. She has borrowed a sum of Rs 50,000 at a daily compound interest rate of 10% for a period of five years.
The amount will be calculated on the basis of this formula:
Principal (1+rate/365) 365*time – Principal (here, 365 is the number of times it is compounded a year)
Hence, the interest can be arrived at by the following calculation:
50,000 (1+10/100*365) 5*365-50000
= 50,000 (1+10/100*365) 5*365 – 50,000
= 50,000 * 1.649 – 50,000
= 32,450
From the above calculation we see that for a period of five years, the daily compounded amount is: Rs. 32,450. Therefore, the total repayable amount will be Rs 50,000+ 32,450 = Rs 82,450
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Step-by-step explanation:
how mach will rs fiftythousanfone year 8 month at the internet rate 9%pa compound annually