Study MaterialsCompound Interest when Interest is Compounded Yearly| How to Calculate Compound Interest Annually?

Compound Interest when Interest is Compounded Yearly| How to Calculate Compound Interest Annually?

How to find Compound Interest when Interest is Compounded Annually?

If the Interest is Compounded Annually then Formula to Calculate the Compound Interest is given by

A = P(1+r/100)n

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    Where A is the Amount

    P = Principal

    r = rate of interest per unit time

    n = Time Duration

    CI can be obtained by subtracting the Principal from the Amount

    CI = A – P

    = P(1+r/100)n – P

    = P{1+r/100)n – 1}

    Solved Examples on Compound Interest when Interest is Compounded Annually

    1. Find the amount and the compound interest on $8, 000 in 2 years and at 5% compounded yearly?

    Solution:

    Principal = $8, 000

    r = 5%

    n = 2

    A = P(1+r/100)n

    Substitute the Input Values in the formula of Amount

    A = 8,000(1+5/100)2

    = 8000(1+0.05)2

    = 8000(1.05)2

    = $8820

    CI = A – P

    = $8820 – $8000

    = $820.

    2. Find the amount of $12,000 for 2 years compounded annually, the rate of the interest being 5 % for the 1st year and 6 % for the second year?

    Solution:

    A = P*(1+p/100)*(1+q/100)

    = 12,000(1+5/100)(1+6/100)

    = 12,000(1.05)(1.06)

    = $13356

    Amount after 2 years is $13356.

    3. Calculate the compound interest (CI) on Rs. 10, 000 for 3 years at 8% per annum compounded annually?

    Solution:

    Principal = Rs. 10,000

    n = 3

    r = 8%

    A = P(1+r/100)n

    = 10,000(1+8/100)3

    = 10,000(1.08)3

    = Rs. 12,597

    CI = A – P

    = 12, 597 – 10, 000

    = Rs. 2, 597

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