Final answer:
The question is about determining the cyclical interest rate and principal amount given the cyclical interests for two different years, which can be calculated using the formulas for simple and compound interest.
Step-by-step explanation:
The question asks to find the cyclical interest rate and the principal amount based on the provided information about the cyclical interest for two years using a real-world financial example. To approach this question, we'll use the concept of simple interest where interest earned is directly proportional to the principal, the rate, and the time.
According to the question, the one year interest is Rs. 1800, and the two year interest is Rs. 3816.
- Let the annual interest rate be 'r'.
- Let the principal amount be 'P'.
In the first year, the interest earned is Rs. 1800, so:
P*r = 1800 ----- (1)
By the end of the second year, the total interest earned is Rs. 3816. Since the interest is cyclical, it is compounded annually, so the interest for the second year includes the interest on the first year's interest as well as the principal.
P(1+r)^2 - P = 3816 ----- (2)
By solving these two equations, we can find the values of 'P' and 'r'.