Question

In order to buy a colour TV, Altaf borrowed Rs 12,000 from a bank at a compound rate of interest of 10 p.c.p.a for 2 years. What is the amount that Altaf must pay back to the bank at the end of 2 years?

Answer 1

Principal = Rs 12,000
Rate of interest = 10% p.a.
Number of years (N) = 2 years
Amount $=\mathrm{P}{\left(1+\frac{\mathrm{R}}{100}\right)}^{\mathrm{N}}$
$$\begin{gathered} =12000{\left(1+\frac{10}{100}\right)}^2 \\ =12000{\left(1+\frac{1}{10}\right)}^2 \\ =12000{\left(\frac{11}{10}\right)}^2 \\ =12000\times \frac{11}{10}\times \frac{11}{10} \\ =\mathrm{Rs}14520 \end{gathered}$$

∴ The amount to be paid back by Altaf is Rs 14520.