Question

Find the compound interest on Rs.25,000 after 2 years compounded annually. The rate of interest being 5% per annum for the first year and 6% per annum during the second year

Answer 1

The compound interest on Rs.25,000 after 2 years, with an interest rate of 5% for the first year and 6% for the second year, is Rs.2,825.

Step-by-step explanation:

We need to find the compound interest on Rs.25,000 for 2 years, with the interest rate being 5% per annum in the first year and 6% per annum in the second year.

For the first year, we use the initial principal of Rs.25,000 with a 5% interest rate:

Amount after the first year = Principal × (1 + interest rate)

= Rs.25,000 × (1 + 0.05)

= Rs.25,000 × 1.05

= Rs.26,250

For the second year, we use the amount accumulated after the first year (Rs.26,250) as the new principal, with a 6% interest rate:

Amount after the second year = New principal × (1 + interest rate)

= Rs.26,250 × (1 + 0.06)

= Rs.26,250 × 1.06

= Rs.27,825

Therefore, the total compound interest after two years is the final amount minus the initial principal:

Total compound interest = Final amount - Initial principal

= Rs.27,825 - Rs.25,000

= Rs.2,825