Question:
Find the compound interest at the rate of 5% per annum for 3 years on that principal which in 3 years at the rate of 5% per annum gives Rs 1200 as simple interest.
Solution:
We know that:
$P=\frac{S I \times 100}{R T}$
$\therefore \mathrm{P}=\frac{1200 \times 100}{5 \times 3}$
= 8,000
Now,
$\mathrm{A}=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)^{\mathrm{I}}$
$=8,000\left(1+\frac{5}{100}\right)^{3}$
$=8,000(1.05)^{3}$
$=9,261$
Now,
$\mathrm{CI}=\mathrm{A}-\mathrm{P}$
$=9,261-8,000$
$=1,261$
Thus, the required compound interest is Rs 1,261 .