Question:
Find the amount of Rs 2400 after 3 years, when the interest is compounded annually at the rate of 20% per annum.
Solution:
Given:
$\mathrm{P}=\mathrm{Rs} 2,400$
$\mathrm{R}=20 \%$ p. $\mathrm{a}$
$\mathrm{n}=3$ years
We know that amount $\mathrm{A}$ at the end of $\mathrm{n}$ years at the rate $\mathrm{R} \%$ per annum when the interest is compounded annually is given by $\mathrm{A}=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)^{\mathrm{n}}$.
$\therefore \mathrm{A}=2,400\left(1+\frac{20}{100}\right)^{3}$
$=2,400(1.2)^{3}$
$=4,147.20$
Thus, the required amount is Rs $4,147.20$.