(1)2400 (2)2592 (3)2678 (4)2540Correct Answer -
The usual way to find the compound interest is given by the formula A = .In this formula, A is the amount at the end of the period of investmentP is the principal that is investedr is the rate of interest in % p.aAnd n is the number of years for which the principal has been invested.In this case, it would turn out to be A =So great. How do you find the value of the above term? It is time consuming.Let us look at another alternative.What happens in compound interest?Interest is paid on interest.In the first year, interest is paid only on the principal. That is very similar to simple interest.However, from the second year onwards things change. In the second year, you pay interest onthe principal and also interest on interest.
Therefore, the Amount at the end of 2
year in compound interest can be computed asfollows1 * Principal + 2* Simple interest on principal + 1 * interest on interest.Similarly, if you were to find the Amount at the end of 3 years in compound interest use thefollowing method1*Principal + 3 * Simple interest on principal + 3 * interest on interest + 1 * interest oninterest on interestLet us see how it works in our example
.The principal is Rs.1500. The rate of interest is 20%. Therefore, the simple interest on principalis 20% of 1500 = Rs.300The interest on interest = 20% interest on the interest of Rs.300 = 20% of Rs.300 = Rs.60.Interest on interest on interest = 20% of Rs.60 = Rs.12. Now add all theseAmount at the end of 3 years = 1*Principal + 3 * Simple interest on principal + 3 * interest on