Question

Calculate the compound interest earned on a principal of ₹ 5,000 at the rate of 20% p.a in 2 years.

Answer 1

$\text{Given: Principal, P =}₹5,000\text{rate of interest, r =}20\%,\text{and time period, n = 2 years.}$

The amount after first year,

$A=P(1+\frac{R}{100})$

$A=5000[1+\frac{20}{100}]=₹6,000$

The amount after second year,

$A=P(1+\frac{R}{100})$
New $P=₹6,000$

$\Rightarrow A=6,000[1+\frac{20}{100}]=₹7,200$

$\text{So, compound interest,}\text{CI = Amount - Principal}\Rightarrow CI=₹7200-₹5,000=₹2,200$