Question

Ramlal deposited $8,000$ with a finance company for $3$ years at an interest of $15$% per annum. What is the compound interest that Ramlal gets after $3$ years?

Answer 1

Step 1: Principal for the first year $=$ $8,000$
Interest for the first year $=\frac{P\times n\times r}{100}$
$=\frac{8000\times 1\times 15}{100}=$ $1,200$
Amount at the end of first year $=P+I=8,000+1,200=$ $9,200$
Step 2: The amount at the end of the first year becomes the Principal for the second year.
Principal for the second year $=$ $9,200$
Interest for the second year $=\frac{P\times n\times r}{100}$
$=\frac{9200\times 1\times 15}{100}=$ $1,380$
Amount at the end of second year $=P+I=9,200+1,380=$ $10,580$
Step 3: The amount at the end of the second year becomes the Principal for the third year.
Principal for the third year $=$ $10,580$
Interest for the third year $=\frac{P\times n\times r}{100}$
$=\frac{10580\times 1\times 15}{100}=$ $1,587$
Amount at the end of third year $=P+I$
$=10,580+1,587=$ $12,167$
Hence, the Compound Interest the Ramlal gets after three years is
$A-P=12,167-8,000=$ $4,167$