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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
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
