Question 71

If the rate of interest is 4% for the first year, 5% for the second year and 6% for the third year, then find the compound interest on ₹10,000 for 3 years, if interest is compounded annually?

Solution

compound interest = ₹10,000 of (100+4)% of (100+5)%of (100+6)% - ₹10,000

= ₹10,000 of 104% of 105% of 106% - ₹10,000

= $$10000\times\frac{104}{100}\times\frac{105}{100}\times\frac{106}{100}-10000$$

= $$10000\times1.04\times1.05\times1.06-10000$$

= $$10000\times1.15752-10000$$

= 11575.2-10000

= ₹1575.2

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