The compound interest on Z 5000 at 8% per annum for 2 years, compounded annually, is
Present value, P = Rs.5000
Interest rate, R = 8% per annum
Time, n = 2 years
∴ Amount (A) = P (1 + R/100)n [Where, P = Present value
R = Annual interest rate
n = Time in years]
∴ A = 5000 (1 + 8/100)2
⇒ A = 5000 (1 + 2/25)2
⇒ A = 5000 (27/25)2
⇒ A = 5000 × 27/25 × 27/25
⇒ A = 200 × 27 × 27/25
⇒ A = 8 × 27 × 27
⇒ A = 5832
∴ Amount = Rs.5832
∴ Compound interest = Rs.(5832 – 5000) [∵CI = A – P]
= Rs.832