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Question
Mohit invests Rs. 8,000 for 3 years at a certain rate of interest, compounded annually. At the end of one year it amounts to Rs. 9,440. Calculate:
- the rate of interest per annum.
- the amount at the end of the second year.
- the interest accrued in the third year.
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Solution
Given:
Principal P = ₹ 8000
Amount after 1 year A1 = ₹ 9440
(i) Rate of interest per annum
`A = P (1+r/100)`
`9440 = 8000 (1+r/100)`
`9440/8000 = 1+ r/100`
`1.18 = 1+r/100`
`r/100 = 0.18`
r = 18% per annum
(ii) Amount at the end of the second year
`A_2 = A_1 (1+r/100)`
A2 = 9440 × 1.18
= ₹ 11139.20
(iii) Interest accrued in the third year
A3 = A2 × 1.18
= 11139.20 × 1.18
= ₹ 13144.26
Interest = A3 − A2
= 13144.26 − 11139.20
= ₹ 2005.06
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