Maria invested Rs. 80,000 in a business. She would be paid interest at 5% per annum compounded annually. Find

(i) the amount standing to her credit at the end of second year and (ii) the interest for the third year.

i. Principle = 80,000

Rate of interest per annum = 5%

Time = years

Compound interest for 2 years

Amount =

=

= 88,200

Compound interest = Amount – principle

= 80,000 - 88,200 = 8,200

8,200 will be credited at the end of 2 years

ii. Compound interest for 3 years

Amount =

=

= 92,610

Compound interest = Amount – principle

= 80,000 – 92,610 = 12,610

Compound interest for 3^rd year

= compound interest of 3 years – compound interest of 2 years

= 12,610 - 8,200

= 4,410

Compound interest for the 3^rd year is 4,410