Calculate the amount and the compound interest on ₹ 5000 in 2 years when the rate of interest for successive years is 6% and 8%, respectively.
Solution:
It is given that
Principal = ₹ 5000
Period = 2 years
Rate of interest for the first year = 6%
Rate of interest for the second year = 8%
We know that
Amount for two years = P (1 + r/100)n
Substituting the values
= 5000 (1 + 6/100) (1 + 8/100)
By further calculation
= 5000 × 53/50 × 27/25
= ₹ 5724
Here
Interest = A – P
Substituting the values
= 5724 – 5000
= ₹ 724
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