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Question

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

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Solution

Simple Interest ,I=PNR100
Here for first year,
P= Rs. 5,000
N=1 year
R=R%
So, Interest at the end of 1st year I=AP=5,6005,000= Rs. 600
600=5,000×1×R100
R=12%
And for the second year,
P= Rs. 5,600
N=1year
R=12%
So, Interest at the end of 2nd year =5,600×1×12100= Rs. 672
And Amount at the end of 2nd year = Rs. 5,600+ Rs. 672= Rs. 6,272

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