The compound interest on Rs. 20,000 at per annum for 3 years is Rs. ____.

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Detailed Solution

Concept:
All I had to do was apply the compound interest formula. H. Use Question Image

directly to get the amount after 3 years and subtract the first amount to get the compound interest for 3 years.
As we know, the principal is rupees. 20,000. The interest rate is

per annum.
And interest rates are synthesised every year. You can now use the compound interest formula to find the amount after 3 years. Using the compound interest formula, the compound interest for t years is calculated as
Question Image

Here, r is the annual interest rate, t is the number of years for which the amount had to be
calculated, P is the principal, and A is the amount after t years. So according to the question

And

So if you include all the values in the compound interest formula:
Question Image

Therefore,
Question Image

So, the amount after 3 years is equivalent to 26,620 rupees.
Here, Compound interest for 3 years = Amount after 3 years - Initial amount.
Therefore, compound interest for 3 years

Hence, the compound interest for 3 years is 6,620 rupees.

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