mathematician
1 year, 5 months ago

Mr Sharma wants to choose a investment plan

1. 15% for 5 years(SI)

2. 20% for 3 years(CI)

Which plan will result in higher amount?

My doubt is while doing the calculation for CI I got 1.728 then why are we subtracting it with 1 in order to find which will result in higher amount?

Kadich Paaji
1 year, 5 months ago

It is because 1 is the principal.
Whenever we calculate compound interest, what we get is the Total amount which is equal to Principal + Interest Earned.
So, 1.2x1.2x1.2=1.728 is the compounded value, earned when we originally start from Rs.1. what interest is earned is 0.728
Always, remember to check if you need TA or Interest for C.I.

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