Question

Compute the compound interest for the third year on Rs. 5000 invested for 5 years at 10% per annum, the interest being payable annually.

Answer 1

For 1st year : P = Rs.5000, R = 10% and T = 1 year

∴ Interest = Rs.`(5000 xx 10 xx 1)/(100)`
= Rs.500
And, amount
=Rs.5000 + Rs.500
=Rs.5500
For 2nd year : P = Rs.5500, R = 10% and T = 1 year

∴ Interest = Rs.`(5500 xx 10 xx 1)/(100)`
 =Rs.550
And, amount
= Rs.5500 + Rs.550
=Rs.6050
For 3rd year : P = Rs.6050, R = 10% and T = 1 year

∴ Interest = Rs.`(6050 xx 10 xx 1)/(100)`
= Rs.605
∴ Compound interest for 3rd year is Rs.605.