Compound 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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