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Question
Mohan borrowed Rs. 16,000 for 3 years at 5% per annum compound interest. Calculate the amount that Mohan will pay at the end of 3 years.
Solution
For 1st year
Principal (P) = Rs.16,000, Rate (R) = 5%, Time (T) = 1 year
∴ Interest =`(16000xx5xx1)/100`= 160 × 5 = Rs.800
∴ Amount at the end of 1st year = Rs. (16,000 + 800) = Rs.16,800
For 2nd year
P = Rs.16,800, R = 5%, T = 1 year
∴ Interest =`(16,800xx5xx1)/100` = 168 × 5 = Rs.840
∴ Amount at the end of 2nd year = Rs. (16,800 + 840) = Rs.17640
For 3rd year
P = 17640, R = 5%, T = 1 year
∴ Interest =`(17640xx5xx1)/100=1764/2` = Rs.882
∴ Amount at the end of 3rd year = Rs. (17640 + 882) = Rs.18522
Hence reqd. amount = Rs.18522
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