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Question
What sum of money will amount to Rs 7,128 in 2 years at compound interest, if the rates of interest are 8% and 10% for successive years?
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Solution
For the second year
Here P = x ; A= Rs 7, 128 ; t = 1 year ; r = 10 % p.a.
`therefore "A" = "P" (1 + "r"/100)^"n"`
`=> "Rs" 7128 = "x" (1 + 10/100)^1`
`=> "Rs" 7128 = "x" (11/10)`
`=> "x" = "Rs" (7128 xx 10)/11`
⇒ x = Rs 6480
The sum of money will be Rs 6,480 at the end of the first year or beginning of the second year.
For the first vear
Here P = x ; A = Rs 6,480 ; t = 1 year ; r = 8 % p.a.
`therefore "A" = "P" (1 + "r"/100)^"n"`
`=> "Rs" 6480 = "x" (1 + 8/100)^1`
`=> "Rs" 6480 = "x" (108/100)`
`=> "x" = "Rs" (6480 xx 100)/108 `
⇒ x = Rs 61 000
The sum of money will be Rs 6,000 at the beginning of the first year.
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