Question

Pankaj took a loan of against his insurance policy at the rate of 10%.aper annum compound ₹7,250 interest. Calculatethe total interest payable by pankaj after 2 years.

Answer 1

The formula for annual compound interest, including principal sum, is:
A = P (1 + r/n) ^(nt)

Where:

A = the future value of the investment/loan, including interest
ie , A=principal amount+ interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for

Here,
P=7250
r=10/100 =0.1
n=1
t=2

Therefore,
A=7250(1+0.1/1)^(1×2)
=7250 × (1.1)^2
=7250×1.21
=8772

But, A=P+interest
Interest=A-P
=8772-7250
=1522