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Question

Amit took a loan of ₹ 8000 from the bank for 1 year at an interest rate of 20% per annum. Calculate the amount he has to pay to the bank at the end of this period if the interest rate is compounded quarterly.

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Solution

Given
Principal = ₹ 800
Interest rate per annum (r) = 20%
Interest rate quartely = 204 = 5 %

Since the interest is compounded quarterly, so there will be four conversion periods in one year.

So, n = 4

By using formula for compound interest, we can write

Amount = P[(1+r100)n]

Amount=8000[(1+5100)4]

Amount= 9724

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