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Question

A person invests 5,000 for two years at a certain rate of interest compounded annually. At the end of one year, this sum amounts to 5,600.

Calculate : (i) the rate of interest per year. (ii) the amount at the end of the second year.


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Solution

Principal P=5,000

Time =2Years

Amount at the end of one year =5,600

Interest for the first year =AP

=56005000=600

(i) Rateofinterest=(Simpleinterest×100)(Principal×Time)

=600×1005000×1=12%

(ii) Principal for the second Year =5,600

Interest for the second year =5600×12×1100

=672

Amount at the end of the second year=Principal+Simpleinterest

=5600+672

=6272


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