Question

Mr Lalit invested Rs. 5000 at a certain rate of interest, compounded annually for two years. At the end of the first year, it amounts to Rs. 5325. Calculate

1) The rate of interest

2) The amount at the end of the second year, to the nearest rupee.

Answer 1

1) P = Rs. 5000, T = 1 year, A =Rs. 5325

I = A - P

⇒ I = 5325 - 5000

⇒ I = 325

So, the interest at the end of first year is Rs. 325.

`I = (PRT)/100`

`=> R = (I xx100)/(PxxT)`

`=> R = (325 xx 100)/(5000 xx 1)`

`=> R = 32500/5000 = 6.5%`

So,the rate of interest at the end of the first year is 6.5 %

2) The amount at the end of the first year will be the principal for the second year.

P = Rs. 5325, T = 1 year, R = 6.5%

`I = (PRT)/100`

`=> I = (5325 xx 6.5 × 1)/100`

`=> I = 346.125`

A = P + I

⇒ A =5325 + 346.125

⇒ A =5671.125

⇒ A ≈ Rs 5671

So, the amount at the end of the second year is Rs. 5671.