Let us learn How to Calculate Compound Interest when Interest Rate is Compounded Yearly in the coming modules. Check out Formula, Solved Examples on finding the Compound Interest Annually. We tried explaining each and every step on how to find Compound Interest. Computing the Compound Interest using Growing Principal can be difficult if the time period is long.
How to find Compound Interest when Interest is Compounded Annually?
If the Interest is Compounded Annually then Formula to Calculate the Compound Interest is given by
A = P(1+r/100)n
Where A is the Amount
P = Principal
r = rate of interest per unit time
n = Time Duration
CI can be obtained by subtracting the Principal from the Amount
CI = A – P
= P(1+r/100)n – P
= P{1+r/100)n – 1}
Solved Examples on Compound Interest when Interest is Compounded Annually
1. Find the amount and the compound interest on $8, 000 in 2 years and at 5% compounded yearly?
Solution:
Principal = $8, 000
r = 5%
n = 2
A = P(1+r/100)n
Substitute the Input Values in the formula of Amount
A = 8,000(1+5/100)2
= 8000(1+0.05)2
= 8000(1.05)2
= $8820
CI = A – P
= $8820 – $8000
= $820.
2. Find the amount of $12,000 for 2 years compounded annually, the rate of the interest being 5 % for the 1st year and 6 % for the second year?
Solution:
A = P*(1+p/100)*(1+q/100)
= 12,000(1+5/100)(1+6/100)
= 12,000(1.05)(1.06)
= $13356
Amount after 2 years is $13356.
3. Calculate the compound interest (CI) on Rs. 10, 000 for 3 years at 8% per annum compounded annually?
Solution:
Principal = Rs. 10,000
n = 3
r = 8%
A = P(1+r/100)n
= 10,000(1+8/100)3
= 10,000(1.08)3
= Rs. 12,597
CI = A – P
= 12, 597 – 10, 000
= Rs. 2, 597
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