Question:
By using the formula, find the amount and compound interest on:
Rs 31250 for 3 years at 8% per annum compounded annually.
Solution:
Principal amount, $P=$ Rs. 31250
Rate of interest, $R=8 \%$ per annum.
Time, $n=3$ years.
The formula for the amount including the compound interest is given below :
$A=$ Rs. $P\left(1+\frac{R}{100}\right)^{\mathrm{n}}$
$\Rightarrow A=$ Rs. $31250\left(1+\frac{8}{100}\right)^{3}$
$\Rightarrow A=$ Rs. $31250\left(\frac{100+8}{100}\right)^{3}$
$\Rightarrow A=$ Rs. $31250\left(\frac{108}{100}\right)^{3}$
$\Rightarrow A=$ Rs. $31250(1.08 \times 1.08 \times 1.08)^{3}$
$\Rightarrow A=$ Rs. 39366
i. e., the amount including the compound interest is Rs 39366 .
$\therefore$ Compound interest $=$ Rs. $(39366-31250)=$ Rs. 8116