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A Man'S Savings Increases by Rs 50 Every Year. If He Saves Rs 500 in the First Year and Puts It at 10% Compound Interest, Find His Savings at the End of the Third Year.

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Question

A man's savings increases by Rs 50 every year. If he saves Rs 500 in the first year and puts it at 10% compound interest, find his savings at the end of the third year.

Sum
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Solution

P =Rs. 500; R = 10°/o p.a.; T = 3 years 

Interest for the 1st year

`= "Rs"  (500 xx 10 xx 1)/100` 

= Rs  50 

Principal for the second year

= Amount at the end of one year + his new savin

= Rs. 500 + Rs. 50 +Rs. 550 =Rs. 1, 100

Interest for the seoond year 

`= "Rs"  (1100 xx 10 xx 1)/100`

= Rs 110 

Compound interest for seoond year =Rs. 110 

Principal for the third year

= Amount at the end of tvvo years + his new savings

=Rs. 1, 100 +Rs. 110 +Rs. 600 =Rs. 1,810 

Interest for the third year 

`= "Rs" (1810 xx 10 xx 1)/100`

= Rs 181

Sum due at the end of third year = his savings at the end of third year

= Rs 1,810 +Rs. 181 =Rs 1,991

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Concept of Compound Interest - Compound Interest as a Repeated Simple Interest Computation with a Growing Principal
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