Shouvik lends ₹1000 to Amit at an interest rate of 10% compounded annually for 2 years. Calculate the amount Amit has to pay to Shouvik at the end of 2 years.

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Solution

Given,
Principal = ₹1000
Time period = 2 years
Rate of interest = 10%

Here, interest is compounded annually.
Interest = $\frac{P T R}{100}$

Interest at the end of $1^{s t}$ year $= 1000 \times \frac{10}{100} = ₹ 100$

Amount $(A_{1})$ at the end of $1^{s t}$ year $= ₹ 1000 + ₹ 100 = ₹ 1100$

Interest at the end of $2^{n d}$ year $= 1100 \times \frac{10}{100} = ₹ 110$

Amount $(A_{2})$ at the end of $2^{n d}$ year $= 1100 + 110 = ₹ 1210$

$∴$ Amit has to pay ₹1210 to Shouvik at the end of 2 years.

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