Question:
Find the amount and the compound interest on Rs 2500 for 2 years at 10% per annum, compounded annually.
Solution:
Principal for the first year $=$ Rs. 2500
Interest for the first year $=$ Rs. $\left(\frac{2500 \times 10 \times 1}{100}\right)=$ Rs. 250
Amount at the end of the first year $=$ Rs. $(2500+250)=$ Rs. 2750
Principal for the second year $=$ Rs. 2750
Interest for the second year $=$ Rs. $\left(\frac{2750 \times 10 \times 1}{100}\right)=$ Rs. 275
Amount at the end of the second year $=$ Rs. $(2750+275)=$ Rs. 3025
$\therefore$ Compound interest $=$ Rs. $(3025-2500)=$ Rs. 525