Question

By using the formula, find the amount and compound interest on:
$Rs.10240$ for $3$ years at $12\frac{1}{2}\%$ per annum compounded annually.

Answer 1

Given:

Principal amount, $\left(P\right)=Rs.10240$

Rate of interest, $\left(R\right)=12\frac{1}{2}\%=\frac{25}{2}\%$ p.a.

Time, $n=3$ years

The formula for the amount including the compound interest is given below:

$A=Rs.P(1+\frac{R}{100}{)}^n$

$\Rightarrow A=Rs.10240(1+\frac{25}{2\times 100}{)}^3$

$\Rightarrow A=Rs.10240(1+\frac{1}{8}{)}^3$

$\Rightarrow A=Rs.10240(\frac{9}{8}{)}^3$

$\Rightarrow A=Rs.10240\times \frac{9}{8}\times \frac{9}{8}\times \frac{9}{8}$

$\Rightarrow A=Rs.20\times 729$

$\Rightarrow A=Rs.14580$

i.e., the amount including the compound interest is $Rs.14,580$.

$\Rightarrow$ Compound interest $=Rs.14580-Rs.10240=Rs.4340$

Therefore, Amount and compound interest are $Rs.14580$ and $Rs.4340$ respectively.