Question

harish invests rs. 5,000 in a bond which gives interest at 2% p.a. during the first year, 5% p.a. during the second year and 10% p.a. during the third year. calculate compound interest.

Answer 1

To calculate compound interest on a bond, we need to use the formula A = P(1+r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times the interest is compounded, and t is the number of years. In this case, the compound interest earned on the bond is Rs. 890.50.

Step-by-step explanation:

To calculate compound interest for three years, we need to use the formula A = P(1+r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times the interest is compounded in a year, and t is the number of years.

In this case, P = Rs. 5,000, r = 2% for the first year, 5% for the second year, and 10% for the third year, n = 1 (since the interest is compounded annually), and t = 3 (since it's a three-year bond).

For the first year, A = 5000 * (1 + 2/100/1)^(1*1) = Rs. 5,100

For the second year, A = 5100 * (1 + 5/100/1)^(1*1) = Rs. 5,355

For the third year, A = 5355 * (1 + 10/100/1)^(1*1) = Rs. 5,890.50

Therefore, the compound interest earned on the bond is Rs. 5,890.50 - Rs. 5,000 = Rs. 890.50