The compound interest on Rs. 5000 at 10% per annum for 2 years is
Present value = Rs.5000
Interest rate = 10% per annum
Time = 2 years
Amount (A) = P (1 + R/100)n [Where, P = Present value
R = Annual interest rate
n = Time in years]
∴ A = 5000 (1 + 10/100)2
⇒ A = 5000 (1 + 1/10)2
⇒ A = 5000 (11/10)2
⇒ A = 5000 × 11/10 × 11/10
⇒ A = 5000 × 121/100
⇒ A = 50 × 121
⇒ A = 6050
∴ Amount = Rs.6050
∴ Compound interest = Rs.(6050 – 5000)
= Rs.1050