Question

₹ 7000 is invested for 5 yrs at 5% rate of interest (compounded annually). Match the principal for each year.

• A. ₹7,000.0
• B. ₹ 7,717.5
• C. ₹ 7,350.0
• D. ₹ 8,508.5

Answer 1

The amount at the end of first year will become the principal for the second year.

The amount at the end of second year will become the principal for the third year.

The amount at the end of third year will become the principal for the fourth year.

Principal for the first year = ₹ 7,000

Amount after first year $=P(1+\frac{R}{100}{)}^n$
$=7000(1+\frac{5}{100}{)}^1$
= ₹ 7350
Principal for second year = ₹ 7350

Principal for third year:
$=P(1+\frac{R}{100}{)}^n$
$=7350(1+\frac{5}{100}{)}^2$
= ₹ 7717.50

Principal for fourth year:
$=P(1+\frac{R}{100}{)}^n$
$=7717.5(1+\frac{5}{100}{)}^3$
= ₹ 8508.50