Question

Find compound interest paid when a sum of $Rs.10000$ is invested for $1$ year and $3$ months at $8\frac{1}{2}\%$ per annum, compounded annually.

Answer 1

Forfirst year

$P=10000,R=8.5$%, $T=1$

Interest $=\frac{PRT}{100}$

$=\frac{(10000\times 8.5\times 1)}{100}=850$

Amount$=$ Interest $+$ Principle $=10000+850=Rs.10850$

Forsecond year principle will be amount of previous year (since interest iscompounded)

$P=10850,R=8.5$%, $T=3$months $=\frac{3}{12}\text{years}=0.25\text{years}$

Interest $=\frac{PRT}{100}$

$=\frac{(10850\times 8.5\times 0.25)}{100}=Rs.230.5625$

Total interest $=850+230.5625=Rs.1080.5625$

$\therefore$ Compound interest paid after $1$ year and $3$months is $Rs.1080.5625$