Question

What will $\mathrm{Rs}.500$ amount to in $10$ years after its deposit in a bank which pays an annual interest rate of $10\%$ compounded annually?

Answer 1

Step 1: Find Compound interest.

In compound interest, the amount after $t$ years is computed as,

$\mathrm{Amount}=\mathrm{Principal}\times {\left(1+\frac{\mathrm{rate}}{100}\right)}^{\mathrm{time}}$

Given that, $\mathrm{Principal}=\mathrm{Rs}.500,\mathrm{Rate}=10\%$ and $\mathrm{time}=10\mathrm{years}$.

Substitute all values in the above expression.

$$\begin{gathered} \mathrm{Amount}=500\times {\left(1+\frac{10}{100}\right)}^{10} \\ =500\times {\left(\frac{11}{10}\right)}^{10} \\ =\mathrm{Rs}.1,296.87 \end{gathered}$$

Hence, after $10$ years the amount will be $\mathrm{Rs}.1296.87$.