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Question
Ramesh saves Rs 4,000 every year and invests it at 10% p.a. compound interest. Calculate his savings at the end of the third year.
Solution
P =Rs. 4,000; R = 10°/o p.a.; T = 3 years
Interest for the 1st year
`=("Rs" 4000 xx 10 xx 1)/100`
= Rs 400
Principal for the second year
= Amount at the end of one year + his new savings
= Rs. 4,000 + Rs. 400 +Rs. 4,000 =Rs. 8,400
Interest for the seoond year
`= ("Rs" 8400 xx 10 xx 1)/100`
= Rs 840
Compound interest for seoond year =Rs. 840
PrincipaI for the third year
= Amount at the end of tvvo years + his new savings
= Rs. 8400 + Rs. 840 + Rs. 4000 =Rs. 13,240
Interest for the third year
`= ("Rs" 13240 xx 10 xx 1)/100`
= Rs 1,324
Sum due at the end of third year = his savings at the end of third year
= Rs. 13,240 + Rs. 1,324 = Rs 14,564
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