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Question

# A person invests Rs10000 for two years at a certain rate of interest compounded annually. At the end of one year, the sum amounts to Rs12000. Calculate (i). the rate of interest per annum (ii) the amount at the end of the second year

Hint:

### Use simple interest to find the rate of interest and from that find total amount at the end of 2years.

## The correct answer is: 14400 RUPEES

### Complete step by step solution:

(i)

We know the formula for total amount = A = P + SI…(i)

where A is the total amount, P is the principal amount and SI is simple interest.

(for 1st year, both simple interest and compound interest are the same)

Here, we have A = 12000 Rs and P = 10000 Rs

On substituting the known values in (i), we get SI = 12000 - 10000 = 2000

So, we have SI = 2000 Rs

We calculate simple interest by the formula,…(ii)

where P is Principal amount, T is number of years and R is rate of interest

Here, we have SI = 2000, P = 10000,T = 1 and R = ?

On substituting the known values in (ii), we get

Hence the rate of interest R is 20%.

(ii)

We know that …(iii)

Here, we have T = 2 years, P = 10000 , R = 20%

Amount at the end of second year will be,

On substituting the known values in (iii), we get

Rupees

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