Three years ago, Beeru purchased a buffalo from Surjeet for Rs. 11000.

1.	Three years ago, Beeru purchased a buffalo from Surjeet for Rs. 11000. What payment will discharge his debt now, the rate of interest being 10% per annum, compounded annually?
Answer» Present value = Rs.11000 Interest rate = 10% per annum Time = 3 years Amount (A) = P (1 + R/100)ⁿ [Where, P = Present value R = Annual interest rate n = Time in years] ∴ A = 11000 (1 + 10/100)³ ⇒ A = 11000 (1 + 1/10)³ ⇒ A = 11000 (11/10)³ ⇒ A = 11000 × 11/10 × 11/10 × 11/10 ⇒ A = 11000 × 1331/1000 ⇒ A = 11 × 1331 ⇒ A = 14641 ∴ Amount = Rs.14641 ∴ Beeru has to pay Rs.14641 to clear the debt.

Three years ago, Beeru purchased a buffalo from Surjeet for Rs. 11000. What payment will discharge his debt now, the rate of interest being 10% per annum, compounded annually?

Answer»

Present value = Rs.11000

Interest rate = 10% per annum

Time = 3 years

Amount (A) = P (1 + R/100)ⁿ [Where, P = Present value

R = Annual interest rate

n = Time in years]

∴ A = 11000 (1 + 10/100)³

⇒ A = 11000 (1 + 1/10)³

⇒ A = 11000 (11/10)³

⇒ A = 11000 × 11/10 × 11/10 × 11/10

⇒ A = 11000 × 1331/1000

⇒ A = 11 × 1331

⇒ A = 14641

∴ Amount = Rs.14641

∴ Beeru has to pay Rs.14641 to clear the debt.