Rs. 31250 for 3 years at 8% per annum compounded annually.
Present value = Rs.31250
Interest rate = 8% per annum
Time = 3 years
Amount (A) = P (1 + R/100)n [Where, P = Present value
R = Annual interest rate
n = Time in years]
∴ A = 31250 (1 + 8/100)3
⇒ A = 31250 (1 + 2/25)3
⇒ A = 31250 (27/25)3
⇒ A = 31250 × 27/25 × 27/25 × 27/25
⇒ A = 31250 × 19683/15625
⇒ A = 2 × 19683
⇒ A = 39366
∴ Amount = Rs.39366
∴ Compound interest = Rs.(39366 – 31250)
= Rs.8116