## 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