What would be the compound interest obtained on an amou?
Answers
You can easily find it by making your own equations, or you can use the compound interest formula.
If you want to use equations then you can do the following:
Let x be the principal amount, 5% rate of interest, and 2 years be the time,
Then,
Principal amount plus interest after 1 year will be,
x + x * 5/100 = (100x + 5x)/100 = 105x/100
Similarly, Interest after 2 years will be,
105x/100 + (105x/100) * 5/100 = 105x/100 + 525x/10000
= (10500x + 525x)/10000 = 11025x/10000
So, final amount after 2 years will be 11025x/10000
It can be useful if any one element is not given in the question and you have to find that, for example, here principal amount was not given. Similarly, time or rate of interest might not be given, you can find easily using this method.
Otherwise, the formula for compound interest is the simplest, that is:
A = P (1 + r/n)^(t)
Here,
A = final value with interest
P = Principal Amount
T = Years
r = rate of interest
n = if compound interest is anually, then it is 1, if half yearly then 2, if quaterly then 4 and if monthly then 12.