A person invests Rs. 5,000 for two years at a certain rate of interest compounded annually. At the end of one year, this sum amounts to Rs. 5,600. Calculate : (i) the rate of interest per year. (ii) the amount at the end of the second year.

Principal (P) = Rs. 5000

Time = 2 Years

Amount at the end of one year = Rs. 5600

Interest for the first year = A – P

= Rs. 5600 – 5000 = Rs. 600

(i) Rate of interest = (Simple interest × 100) / (Principal × Time)

= (600 × 100) / (5000 × 1) = 12%

(ii) Principal for the second Year = Rs. 5600

Interest for the second year = (5600 × 12 × 1) / 100

= ₹ 672

Amount at the end of the second year

= Principal + Simple interest 

= 5600 + 672 

= ₹ 6272

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