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.

Answer 1

Given
Principal = ₹ 800
Interest rate per annum (r) = 20%
Interest rate quartely = $\frac{20}{4}$ = 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

$\text{Amount = P}\left[{(1+\frac{r}{100})}^n\right]$

$\text{Amount}=8000\left[{(1+\frac{5}{100})}^4\right]$

$\text{Amount}=₹9724$