You put Rs. 10,000 in a CD account for a locking period of one year at 6.7% rate p.a. At the end of the locking period, you decide to reinvest the money in two more locking period of year each. What will be the amount at the end of third year?
Answers
Given : You put Rs. 10,000 in a CD account for a locking period of one year at 6.7% rate p.a.
At the end of the locking period, you decide to reinvest the money in two more locking period of year each.
To Find : What will be the amount at the end of third year
Solution:
Case 1 : Simple Interest
Amount after 1 Year = P + SI
SI = P * R * T /100
P = 10000
R = 6.7
T = 1
SI = 10000 * 6.7 * /100 = 670 Rs
Amount after 1 Year = 10000 + 670 = 10670
10670 Reinvested
P = 10670
R = 6.7
T = 2 Years
SI = 10670 * 6.7 * 2 / 100 = 1,429.78 Rs
Amount at the end of 3rd year = 10670 + 1,429.78
= 12,099.78 Rs
Considering compound interest
P = 10000
R = 6.7
T = 3 years
A = 10000 ( 1 + 6.7/100)³ = 12,147.68 Rs
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