Question

Given the principal = Rs 40,000, rate of interest = 8% p.a. compounded annually. Find

1. Interest if period is one year.
2. Principal for 2nd year.
3. Interest for 2nd year.
4. Amount if period is 2 years.

Answer 1

Given, principal (P) = Rs. 40000

Rate of interest (R) = 8% per annum

a. Compound interest for one year,

We know that,

`A = P(1 + R/100)^n`

= `40000(1 + 8/100)^1`  ...[∵ n = 1 yr]

= `40000 xx 108/100`

∴ Amount, A = 400 × 108 = Rs. 43200

∴ Compound interest, CI = A – P

= Rs. 43200 – Rs. 40000

= Rs. 3200

b. Amount of 1^st year = Principal of 2^nd year = Rs. 43200

c. Now, amount for the second year:

`A = P(1 + R/100)^1`

`A = 43200(1 + 8/100)^1`

A = Rs. 46656

Compound interest = Amount – Principal

= Rs. 46656 – Rs. 43200

= Rs. 3456

d. For period of two years, we have already calculated amount = Rs. 46656