A man invests Rs. 5000 at a rate of 5% per annum compounded annually. What will

₹0.0

Question: A man invests Rs. 5000 at a rate of 5% per annum compounded annually. What will be the amount after 3 years? (2020)

Options:

Correct Answer: Rs. 5798.75

Exam Year: 2020

Solution:

Amount = P(1 + r)^n = 5000(1 + 0.05)^3 = 5000(1.157625) = 5798.75.

A man invests Rs. 5000 at a rate of 5% per annum compounded annually. What will be the amount after 3 years? (2020)

A man invests Rs. 5000 at a rate of 5% per annum compounded annually. What will be the amount after 3 years? (2020)

Step 1: Identify the principal amount (P), which is Rs. 5000.
Step 2: Identify the annual interest rate (r), which is 5%. Convert this to decimal form: 5% = 0.05.
Step 3: Identify the number of years (n) the money is invested, which is 3 years.
Step 4: Use the formula for compound interest: Amount = P(1 + r)^n.
Step 5: Substitute the values into the formula: Amount = 5000(1 + 0.05)^3.
Step 6: Calculate (1 + 0.05) = 1.05.
Step 7: Raise 1.05 to the power of 3: (1.05)^3 = 1.157625.
Step 8: Multiply the principal amount by the result: Amount = 5000 * 1.157625.
Step 9: Calculate the final amount: Amount = 5798.75.

Compound Interest – Understanding how to calculate the future value of an investment using the formula for compound interest.