A sum of Rs. 2000 at 40% per annum compounded annually. Calculate the interest for the third year at compound interest.

When a sum of amount is compounded anually, then there after each interest which is gained on the amount is added with the principal amount and then the next yera's principal is generated, and then on the second year the interest is calculated on the basis of the new principal.

Explanation:

so in order to calculate the interest of the amount Rs 2000/- on third year we will do the following:-

interest 1st year = $$\frac{2000\times40 }{ 100} = 800$$

new principal = 2800

interest on 2nd year =$$\frac{ 2800 \times40 /}{100 }= 1120$$

new principal = 3920

interest on 3rd year = $$\frac{3420 \times 40 }{ 100} = 1568$$