Question

What will be a loan of 10,000 amount to in 4 years if compounded annually at the rate of 7% per annum
respectively.​

Answer 1

Step-by-step explanation:

Principal for the first year =Rs 1000

S

I

=

P

×

R

×

T

100

S

I

f

o

r

1

s

t

y

e

a

r

=

1000

×

4

×

1

100

S

I

f

o

r

1

s

t

y

e

a

r

=

R

s

40

Amount at the end of first year =Rs1000 + Rs 40 = Rs 1040. Principal for the second year = Rs1040

S

I

f

o

r

2

n

d

y

e

a

r

=

1040

×

4

×

1

100

S

I

f

o

r

2

n

d

y

e

a

r

=

R

s

41.60

Amount at the end of second year,

A

m

o

u

n

t

=

R

s

1040

+

R

s

41.60

=

R

s

1081.60

Therefore,

C

o

m

p

o

u

n

d

i

n

t

e

r

e

s

t

=

R

s

(

1081.60

–

1000

)

=

R

s

81.60

Remark: The compound interest can also be computed by adding the interest for each year.