Question

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

Solution

## Principal (P) = Rs. 4000 Rate (R)  =5% p.a Period (T) = 2 years ∴ Interest for the first year =PRT100 =4000×5×1100=Rs.200 Amound after one year = Rs. 4000 + Rs. 200 = Rs. 4200 ∴ Principal for the second year = Rs. 4200 ∴ Interest for the second year =Rs.4200×5×1100=Rs.210 ∴ Compound interest for 2 years = Rs. 200 + Rs. 210 = Rs. 410.

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