Question

Calculate the compound interest for the second year on ₹8,000/- invested for 3 years 10% per annum.

Answer 1

Hint:Since we are calculating compound interest, the amount yielded in the previous year becomes the principal sum for present year when the rate is compounded annually. In this question we are doing step by step calculation/solution.

Formula used: $I = \dfrac{{PRT}}{{100}}and\,\,A = P + I$

Complete step-by-step answer:
Where I = interest
R = Rate of interest
T – Time
P – Principal sum
A – Amount
For first year P1 = ₹8000
$R_1$ = 10% P.a
$T_1$ = 1 year
$I_1$ = $\dfrac{{{P_1} \times {R_1} \times {T_1}}}{{100}} = 8000 \times \dfrac{{10}}{{100}} \times 1$
$I_1$ = ₹800
${A_1} = {P_1} + {I_1} = 8000 + 800$
= ₹8800
For second year P2 = A1 = ₹8800
$R_2$ = 10% P.a.
$T_2$ = 1 year.
$I_2$ = $\dfrac{{{P_2} \times {R_2} \times {T_2}}}{{100}} = 8800 \times \dfrac{{10}}{{100}} \times 1$
= ₹880
Thus, compound interest for the second year is ₹880.

Note: This problem can also be solved by using the formula of compound interest alternatively.Both the methods yield the same result