If a sum of Rs. 1200 is invested at a compound interest rate of 5% per annum, wh

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Question: If a sum of Rs. 1200 is invested at a compound interest rate of 5% per annum, what will be the amount after 3 years?

Options:

Correct Answer: Rs. 1386.25

Solution:

Using the formula A = P(1 + r)^t, A = 1200(1 + 0.05)^3 = 1200 * 1.157625 = 1389.15.

If a sum of Rs. 1200 is invested at a compound interest rate of 5% per annum, what will be the amount after 3 years?

If a sum of Rs. 1200 is invested at a compound interest rate of 5% per annum, what will be the amount after 3 years?

Step 1: Identify the principal amount (P), which is Rs. 1200.
Step 2: Identify the annual interest rate (r), which is 5%. Convert this to decimal form by dividing by 100: 5% = 0.05.
Step 3: Identify the time period (t) in years, which is 3 years.
Step 4: Use the compound interest formula A = P(1 + r)^t.
Step 5: Substitute the values into the formula: A = 1200(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 Rs. 1200 by 1.157625: 1200 * 1.157625 = 1389.15.
Step 9: The final amount after 3 years is Rs. 1389.15.

Compound Interest Calculation – Understanding how to apply the compound interest formula A = P(1 + r)^t to calculate the total amount after a certain period.