Question

Shanker invests ₹ 48000 for 3 years at 5% per annum compound interest. Find

1. the interest for the first year. 
2. the amount at the end of second year.
3. the interest for third year.

Answer 1

Given:

• Principal (P) = ₹ 48,000
• Rate of Interest (R) = 5% per annum (compounded annually)
• Time (T) = 3 years

Step-wise calculation:

i. Interest for the first year

For the first year, interest is simple because it is on the original principal.

Interest₁ = `(P xx R xx 1)/100`

= `(48000 xx 5 xx 1)/100`

=  ₹ 2400

ii. Amount at the end of the second year

Amount after first year:

A₁ = P + Interest₁

= 48000 + 2400

= ₹ 50400

For the second year, interest is calculated on the new principal (A₁): 

Interest₂ = `(50400 xx 5 xx 1)/100`

Interest₂ = ₹ 2520

Amount at the end of second year: 

A₂ = A₁ + Interest₂

= 50400 + 2520

= ₹ 52920

iii. Interest for the third year

Now interest will be on the amount at the end of the second year:

Interest₃ = `(52920 xx 5 xx 1)/100`

Interest₃ = ₹ 2646