Question

What will be the compound interest on Rs. 4000 in two years when rate of interest is $2\%$ per annum?

Answer 1

Principal (P) = Rs. 4000
Rate (R) $=5\%$ p.a
Period (T) = 2 years
$\therefore$ Interest for the first year $=\frac{PRT}{100}$
$=\frac{4000\times 5\times 1}{100}=Rs.200$
Amound after one year = Rs. 4000 + Rs. 200 = Rs. 4200
$\therefore$ Principal for the second year = Rs. 4200
$\therefore$ Interest for the second year
$=Rs.\frac{4200\times 5\times 1}{100}=Rs.210$
$\therefore$ Compound interest for 2 years = Rs. 200 + Rs. 210 = Rs. 410.