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Question
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.
Solution
Principal (P) = Rs.5000
Period (T) = 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 =`("S.I."xx100)/("P"xx"T")`
`=(600xx100)/(5000xx1)`
= 12% p.a.
(ii) Principal for the second year = Rs.5600
Interest for the second year =`(5600xx12xx1)/100`
= ₹672
∴ Amount at the end of the second year
= P + S.I.
= 5600 + 672
= ₹6272
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