Arjun deposited ` 4500 with a company at 20% p.a. for 3 years at compound interest. Findthe compound interest and the amount he received at the end of 3 years.
Question
Arjun deposited ` 4500 with a company at 20% p.a. for 3 years at compound interest. Findthe compound interest and the amount he received at the end of 3 years.
Solution
To solve this problem, we need to use the formula for compound interest, which is:
A = P (1 + r/n)^(nt)
Where: A = the amount of money accumulated after n years, including interest. P = the principal amount (the initial amount of money) r = annual interest rate (in decimal) n = number of times that interest is compounded per year t = time the money is invested for in years
Given in the problem: P = 4500 (the initial amount of money) r = 20% per annum = 20/100 = 0.2 (annual interest rate in decimal) n = 1 (since it is compounded annually) t = 3 years
Substitute these values into the formula:
A = 4500 (1 + 0.2/1)^(1*3) A = 4500 (1 + 0.2)^3 A = 4500 * 1.2^3 A = 4500 * 1.728 A = 7776
So, the amount Arjun received at the end of 3 years is ` 7776.
To find the compound interest, subtract the initial principal from the total amount:
Compound Interest = A - P Compound Interest = 7776 - 4500 Compound Interest = ` 3276
So, the compound interest is ` 3276.
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