Question:
Surabhi borrowed a sum of Rs 12000 from a finance company to purchase a refrigerator. If the rate of interest is 5% per annum compounded annually, calculate the compound interest that Surabhi has to pay to the company after 3 years.
Solution:
$\mathrm{A}=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)^{\mathrm{n}}$
$=12,000\left(1+\frac{5}{100}\right)^{3}$
$=12,000(1.05)^{3}$
$=13,891.50$
Thus, the required amount is Rs $13,891.50$.
Now,
$\mathrm{CI}=\mathrm{A}-\mathrm{P}$
$=\mathrm{Rs} 13,891.50-\mathrm{Rs} 12,000$
$=\mathrm{Rs} 1,891.50$