Question

Simple interest on a sum of money for 2 years at 4 % is rupees 450. find compound interest on the same sum at the same rate for 2 years.

Answer 1

The formula for SI = Pnr/100

Given SI = Rs. 450, n = 2 years and r = 4%, we have

450 = 2*4*P/100

Or P = 450*100/(2*4) = 5625.Rs.

CI for the same interest rate for 2 years, compounded can be given by the formula

A = P(1+r/100)^n.

Here, P = 5625, r = 4 % and n = 2 year,
Thus A = 5625*(1+4/100)^2 = 5625*(1.04)^2 = 6084 Rs.

Therefore, the compound interest is A - P = 6084-5625 = 459. Rs.

Thus, the CI for Rs. 5625 at 4% for 2year is Rs. 459