Question

Find the amount of Rs. 10000 after 2 years compounded annually; the rate of interest being 10% per anum during the first year and 12% per annum during the second year. Also, find the compound interest.

Answer 1

Present value = Rs.10000 

Interest rate for 1^st year, p = 10 % per annum 

Interest rate for 2^nd year, q = 12 % per annum 

Time = 2 years 

Amount (A) = P × (1 + p/100) × (1 + q/100) 

A = 10000 × (1 + 10/100) × (1 + 12/100) 

= 10000 × (1 + 1/10) × (112/100) 

= 10000 × 11/10 × 112/100 

= 10 × 11 × 112 = 12320 

∴ Amount = Rs.12320 

∴ Compound interest = Rs.(12320 – 10000) 

= Rs.2320