CBSE Class 8CBSE
Share
Notifications

View all notifications

Applications of Compound Interest Formula

Login
Create free account


      Forgot password?

notes

There are some situations where we could use the formula for calculation of amount in CI. Here are a few. 
(i) Increase (or decrease) in population. 
(ii) The growth of a bacteria if the rate of growth is known. 
(iii) The value of an item, if its price increases or decreases in the intermediate years.

Example:  The population of a city was 20,000 in the year 1997. It increased at the rate of 5% p.a. Find the population at the end of the year 2000.
Solution: There is 5% increase in population every year, so every new year has new population. Thus, we can say it is increasing in compounded form. Population in the beginning of 1998 = 20000  (we treat this as the principal for the 1st year)
Increase at 5% = `5/100 xx 20000 = 1000`
Population in 1999 = 20000 + 1000 = 21000  .....(Treat as the principal for the 2nd year.)
Increase at 5% = `5/100 xx 21000 = 1050`
Population in 2000 = 21000 + 1050 
= 22050  .....( Treat as the principal for the 3nd year.)
Increase at 5% = `5/100 xx 22050`
=1102.5
At the end of 2000 the population = 22050 + 1102.5 = 23152.5
or, Population at the end of 2000 = 20000 `(1+5/100)^3`
`= 20000 xx 21/20 xx 21/20 xx 21/20`
= 23152.5
So, the estimated population = 23153.

S
View in app×