Calculate compound interest on Rs 4000 for 2.5 years at 8 interest calculated annually

Solution

Principal [P] = Rs. 4000
Rate [R] =5% p.a
Period [T] = 2 years
∴ Interest for the first year =PRT100
=4000×5×1100=Rs.200
Amound after one year = Rs. 4000 + Rs. 200 = Rs. 4200
∴ Principal for the second year = Rs. 4200
∴ Interest for the second year
=Rs.4200×5×1100=Rs.210
∴ Compound interest for 2 years = Rs. 200 + Rs. 210 = Rs. 410.

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Tick the correct answer in each of the following: The compound interest on Rs 4000 at 10% per annum for 2 years 3 months, compounded annually, is a Rs 916 b Rs 900 c Rs 961 d Rs 896

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Solution

Principal [P] = Rs. 4000Rate [R] =10% p.a.Period [n] = 2 years 3 months=214 years∴Amount [A] = P [1+R100]n=Rs.4000 [1+10100]2[1+10×1100×4]=Rs. 4000×1110×1110×4140=Rs. 4961∴C.I. = A - P = Rs. 4961 - 4000=Rs.961 [c]

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