what is the compound intrest of rupees 2000 in 3 years at the rate of 5% per annum
Answers
Solution!!
The concept of compound interest has to be used here. The principal, rate of interest and time is given in the question. According to the question, we are asked to find the compound interest.
There are two methods of finding the compound interest. We can use the formula or we can calculate it without the formula. I'mma do both the ways.
With formula:-
Principal = Rs 2000
Rate of interest = 5%
Time = 3 years
Amount = P(1 + (R/100))ⁿ
Amount = 2000(1 + (5/100))³
Amount = 2000(105/100)³
Amount = 2000(21/20)³
Amount = 2000 × (9261/8000)
Amount = 9261/4
Amount = Rs 2315.25
CI = Amount - Principal
CI = Rs 2315.25 - Rs 2000
CI = Rs 315.25
Without formula:-
First year:-
Principal = Rs 2000
Rate of interest = 5%
Time = 1 year
SI = (P × R × T)/100
SI = (2000 × 5 × 1)/100
SI = Rs 100
Amount = Principal + SI
Amount = Rs 2000 + Rs 100
Amount = Rs 2100
Second year:-
The amount in the first year becomes the principal in the second year.
Principal = Rs 2100
Rate of interest = 5%
Time = 1 year
SI = (P × R × T)/100
SI = (2100 × 5 × 1)/100
SI = Rs 105
Amount = Principal + SI
Amount = Rs 2100 + Rs 105
Amount = Rs 2205
Third year:-
The amount in the second year becomes the principal in the third year.
Principal = Rs 2205
Rate of interest = 5%
Time = 1 year
SI = (P × R × T)/100
SI = (2205 × 5 × 1)/100
SI = Rs 110.25
Amount = Principal + SI
Amount = Rs 2205 + Rs 110.25
Amount = Rs 2315.25
CI = Amount in third year - Principal in first year
CI = Rs 2315.25 - Rs 2000
CI = Rs 315.25
Abbreviations used:-
P → Principal
R → Rate of interest
T and n → Time
SI → Simple interest
CI → Compound interest