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Ramesh Saves Rs 4,000 Every Year and Invests It at 10% P.A. Compound Interest. Calculate His Savings at the End of the Third Year.

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Question

Ramesh saves Rs 4,000 every year and invests it at 10% p.a. compound interest. Calculate his savings at the end of the third year.

Sum
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Solution

P =Rs. 4,000; R = 10°/o p.a.; T = 3 years 

Interest for the 1st year 

`=("Rs"  4000 xx 10 xx 1)/100`

= Rs 400 

Principal for the second year

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

= Rs. 4,000 + Rs. 400 +Rs. 4,000 =Rs. 8,400 

Interest for the seoond year 

`= ("Rs"  8400 xx 10 xx 1)/100`

= Rs 840 

Compound interest for seoond year =Rs. 840 

PrincipaI for the third year

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

= Rs. 8400 + Rs. 840 + Rs. 4000 =Rs. 13,240

Interest for the third year 

`= ("Rs"  13240 xx 10 xx 1)/100`

= Rs 1,324

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

= Rs. 13,240 + Rs. 1,324 = Rs 14,564 

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