Rs. 2500 was deposited in bank for 6 years. Amount received after the period was Rs. 3700. Find the rate of interest per annum .
Answers
Explanation:
Principal(P)=Rs2500
Time(T)=6months=
12
6
years
=
2
1
years
I=Interest=Rs100
Let Rate beR
Therefore I=
100
P×T×R
100=
100
(2500×
2
1
×R)
100×100×
2500
2
=R
R=8%
Now new principal=Rs3200
Time=9months
=
12
9
years
=
4
3
years
Rate(R)=8%
∴ I=
100
P×T×R
=3200×
4
3
×
100
8
=192
Explanation:
Compound interest can be calculated with a simple formula.
Compound Interest = Total amount of Principal and Interest in future (or Future Value) less Principal amount at present (or Present Value)
Compound Interest = P [(1 + i) n – 1]
P is principal, I is interest rate, n is number of compounding periods.
An investment of Rs 1,00,000 for 5 years at 12% rate of return compounded annually is worth Rs 1,76,234. From the graph below we can clearly see how an investment of Rs 1,00,000 has grown in 5 years.
In compound interest one earns interest on interest. Therefore, the investment already includes all the previous interests. And interest is paid on that.
Year Investment(Rs) Interest(Rs) At Maturity(Rs)
1 1,00,000 12,000 112,000
2 1,12,000 13,440 125,440
3 1,25,440 15,052.8 1,40,492.8
4 1,40,492.8 16,859.14 1,57,351.9
5 1,57,351.9 18,882.23 1,76,234.2