Question

A man borrowed $\text{Rs}20,000$ for $2$ years at $8\%$ per year compound interest. Calculate the interest of the second year.

Answer 1

Simple Interest,

$I=\frac{P\times N\times R}{100}$
Here for first year,
Principal, $P=$ $\text{Rs}20,000$
Number of years, $N=1$ year
Rate, $R=8\%$
So, Interest at the end of 1st year, $I=\frac{20,000\times 1\times 8}{100}=$ $\text{Rs}1,600$
So, for second year,
$P=$ $\text{Rs}20,000+$ $\text{Rs}1,600=$ $\text{Rs}21,600$
$N=1$ year
$R=8\%$
Therefore,
$I=\frac{21,600\times 1\times 8}{100}=$ $\text{Rs}1,728$