If a sum of ₹ 20,000 is borrowed by Heena for 2 years at an interest of 8% compounded annually, then the amount she has to pay at the end of 2 years is
We know that S.I. = PRT100
where, S.I. is the simple interest, P is the principal, R is the rate of interest per annum and T is the time(number of years).
Let the principal for the first year be P1.
Here, P1 = ₹ 20000
SI1 = Simple Interest at 8% per annum for first year = 20000×8100 = ₹ 1600
Amount at the end of first year
= P1 + SI1
= 20,000 + 16,00 = ₹ 21600
This becomes principal for the next year.
Interest for the second year = 21600×8100 = ₹ 1728
Total amount to be paid back
= ₹ 21600 + ₹ 1728 = ₹ 23,328