Question

RS. 40,000 ARE INVESTED AT
8% P.A. COMPOUND INTEREST.
THE INTERST IN THE FOURTH
YEAR IS RS.

Answer 1

The compound interest in the fourth year is Rs. 14420.

Given:

Rupees 40,000 are invested at a rate of 8% per annum compounded annually for four years.

To find:

The compound interest in the fourth years

Solution:

Formula used:

The formula for compound interest when the interest is compounded annually is given by  

                  C.I = P (1 + r/n)^nt - P  

Where,

P = Principal amount

r = Rate of interest

n = number of compounds per year

t = time period

From the given data,

Principal amount = 40000

Rate of interest = 8% = 0.08

Number of compounds per year = 1

Time period = 4

From the given data

Compound interest = 40000(1 + 0.08/1)⁴- 40000

= 40000 [(1.08)⁴- 1 ]    

= 40000 [1.3605 - 1 ]

= 40000 [ 0.3605 ]

= 14420

Therefore,

The compound interest in the fourth year is Rs. 14420.

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