Question

What sum will amount to Rs. 636.70 in 3 years at 5% p.a. compound interest

Answer 1

Solution!!

The concept of compound interest has to be used here. The amount, rate of interest and time is given in the question. I'll be calculating it with the formula. You may calculate without the formula. The principal amount with interest after the first period of time becomes the principal for the next period of time.

Amount = Rs 636.70

Time = 3 years

Rate of interest = 5%

Amount = P(1 + R/100)ⁿ

636.70 = P(1 + 5/100)³

636.70 = P(105/100)³

636.70 = P(21/20)³

636.70 = P × (21/20) × (21/20) × (21/20)

636.70 = P × 9261/8000

636.70 × 8000/9261 = P

P = 5093600/9261

P ≈ Rs 550.0054

Abbreviations used:-

Principal → P

Rate of interest → R

Time → n