Rs. 1000 is lent at a 4% p.a. for 1 year at simple interest. If at the

1.	Rs. 1000 is lent at a 4% p.a. for 1 year at simple interest. If at the end of the first year, the whole amount is lent at compound interest for 2 years, find the total interest (approx.) incurred in these years.1). Rs. 1202). Rs. 1223). Rs. 1254). Rs. 13
Answer» <P>Amount at the end of first year = P + PRT/100 = 1000 + (1000 × 1 × 4)/100 = Rs. 1040 The formula for CI at annual compound interest, including principal sum, is: $(CI\; = \;P{\left( {1\; + \;\FRAC{r}{{100\; \times \;n}}} \right)^{nt}} - P)$ Where: CI = Compound Interest P = the principal investment amount (the INITIAL deposit or loan amount) r = the annual interest rate (decimal) n = the number of times that interest is compounded PER year t = the number of years the money is invested or borrowed for Here n = 1 CI = 1040(1 + 4/100)² - 1040 CI = Rs. 85 Total interest = 85 + 40 = Rs. 125

Rs. 1000 is lent at a 4% p.a. for 1 year at simple interest. If at the end of the first year, the whole amount is lent at compound interest for 2 years, find the total interest (approx.) incurred in these years.1). Rs. 1202). Rs. 1223). Rs. 1254). Rs. 13

Answer»

<P>Amount at the end of first year = P + PRT/100 = 1000 + (1000 × 1 × 4)/100 = Rs. 1040

The formula for CI at annual compound interest, including principal sum, is: $(CI\; = \;P{\left( {1\; + \;\FRAC{r}{{100\; \times \;n}}} \right)^{nt}} - P)$

Where:

CI = Compound Interest

P = the principal investment amount (the INITIAL deposit or loan amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded PER year

t = the number of years the money is invested or borrowed for

Here n = 1

CI = 1040(1 + 4/100)² - 1040

CI = Rs. 85

Total interest = 85 + 40 = Rs. 125

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