Word Problem 7

Simple & Compound Interest

Problem 7: The rate of compound interest for Rs 1000 for the first year is 5% pa, and for the second year it is 6% pa. What will be the amount of interest after 2 years?



simple arithmetic questions and answers

Solution:

There are two terms of interest calculation. For first term rate of interest is 5 and for second terms it is 6. While principal amount 1000 Rs is for 1st term, and for second term the principal amount will be 1000+Interest of first term !

1st Case

Principal Amount = P = 1000 Rs

Rate of Interest = R= 5 % per annum

Term of Interest Implication = T= 1 Year

We know,

I = \frac{P\times R\times T }{100}

I = \frac{1000\times 5\times 1 }{100}

I = 50

We know that,

A=P+I

A=1000+50

A=1050 Rs

Case 2

Now, amount of first case A=1050 Rs will be principal amount for second term

So,

Principal amount P=1050

Term =T= 1 year

Rate of interest R= 6% pa

Again using

I = \frac{P\times R\times T }{100}

I = \frac{1050\times 6 \times 1}{100}

I = 63

So total amount of interest ;

Ist Case+ 2nd Case= 50 + 63=113Rs

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