Question:
By using the formula, find the amount and compound interest on:
Rs 10000 for 2 years at 11% per annum compounded annually.
Solution:
Principal amount, $P=$ Rs. 10000
Rate of interest, $R=11 \%$ per annum.
Time, $n=2$ years.
The formula for the amount including the compound interest is given below :
$A=$ Rs. $P\left(1+\frac{\mathrm{R}}{100}\right)^{\mathrm{n}}$
$\Rightarrow A=$ Rs. $10000\left(1+\frac{11}{100}\right)^{2}$
$\Rightarrow A=$ Rs. $10000\left(\frac{100+11}{100}\right)^{2}$
$\Rightarrow A=$ Rs. $10000\left(\frac{111}{100}\right)^{2}$
$\Rightarrow A=$ Rs. $10000(1.11 \times 1.11)^{2}$
$\Rightarrow A=$ Rs. 12321
i. e., the amount including the compound interest is Rs $12321 .$
$\therefore$ Compound interest $=$ Rs. $(12321-10000)=$ Rs. 2321