A man deposits Rs 1,000 in a savings bank account. How much will it amount in three years if the rate of interest is 5% per annum and the interest is payable annually ?

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Solution

Interest on Rs 1000 for the first year $= R s \frac{1000 \times 1 \times 5}{100} = R s 10 \times 1 \times 5 = R s 50$
Amount after one year $= R s 1000 + R s 50 = R s 1050$
$∴$ Interest for the second year $= \frac{1050 \times 1 \times 5}{100} = R s \frac{105}{2} = R s 5.50$
Amount after two years $= R s 1050 + R s 52.50 = R s 1102.50$
$∴$ Interest for the third year $= R s \frac{1102.50 \times 1 \times 5}{100} = R s \frac{5512.5}{100} = R s 55.13$
Amount after three years $= R s 1102.50 + R s 55.13 = R s 1157.63$
Thus, Rs 1,000 will become Rs 1,157.63 in three years.

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