SOLUTION: A man invest rupees 10000 for 3 years at a certain rate of interest compounded annually at the end of one year it amounts to 11200 rupees calculate the rate of interest per annum

Question 1141819: A man invest rupees 10000 for 3 years at a certain rate of interest compounded annually at the end of one year it amounts to 11200 rupees calculate the rate of interest per annum
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
at the end of one year it is equal to 11200 from 10000.

the interest rate for that one year is 11200 / 10000 = 1.12 - 1 = .12 * 100 = 12%.

since the investment is for 3 years, then the interest rate of 12% per year is applied 3 times to the remaining balance after each year.

you start with 10000
at the end of one year you have 10000 * 1.12 = 11200.
at the end of two years, you have 11200 * 1.12 = 12544.
at the end of three years, you have 12544 * 1.12 = 14049.28.

the formula used is f = p * (1 + r) ^ n

f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.

the time periods are in years for this problem.

formula becomes f = 10000 * (1 + .12) ^ 3

solve for f to get f = 14049.28.

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