Question

Vasu invested Rs. 12.600 at an interest rate of 10% per annum compounded annually What amount would he get after 2 years?​

Answer 1

Solution:

It is given that:

➡ Principal Amount [P] = Rs.12,600

➡ Rate of interest = 10%

➡ Time period = 2 years

➡ Mode of compounding = Annual

We need to find the amount Vasu would be getting after the end of the time period. Therefore, we will be using the compound interest formula stated below:

$\sf{\implies\:A=P\left(1+\dfrac{R}{100}\right)^n}$

Adding the values we know into the equation,

$\sf{\longrightarrow\:A=12600\left(1+\dfrac{10}{100}\right)^2}$

$\sf{\longrightarrow\:A=12600\left(1+\dfrac{1}{10}\right)^2}$

$\sf{\longrightarrow\:A=12600\times\dfrac{11}{10}\times\dfrac{11}{10}}$

$\sf{\longrightarrow\:A=126\times11\times11}$

$\sf{\longrightarrow\:A=15246}$

Therefore, the amount is Rs.15246.

Vasu will get an amount of Rs.15246 at the end of 2 years.

Compound interest:

In compound interest, the interest amount is added after a each certain period of time depending upon the mode of compounding. Some ways of compounding are:

✳ Annual compounding

✳ Half-yearly compounding

✳ Quarterly compounding

The basic formula for compound interest is:

$\sf{\implies\:A=P\left(1+\dfrac{R}{100}\right)^n}$

which is used for compounding annually and for the other two modes of compounding, a mild variation of the given formula is used.