Question

Find the time, in years, in which Rs. 4,000 will produce Rs. 630.50 as compound interest at 5% compounded annually.

Answer 1

Given : P= Rs. 4,000; C.I.= Rs. 630.50 and r = 5%

∴ C.I. = `P[(1 + r/100)^n - 1]`

⇒ 630.50 = `4,000[( 1 + 5/100)^n - 1]`

⇒ `[630.50]/[4,000] = [(21/20)^n - 1]`

⇒ `[1,261]/[8,000] = [(21/20)^n - 1]`

⇒ `[1,261]/[8,000] + 1 = [(21/20)^n - 1]`

⇒ `[9,261]/[8,000] = (21/20)^n`

⇒ `(21/20)^3 = (21/20)^n`

On comparing,

n = 3 years