The compound interest on Z 5000 at 8% per annum for 2 years, compounded annually, is

Present value, P = Rs.5000


Interest rate, R = 8% per annum


Time, n = 2 years


∴ Amount (A) = P (1 + R/100)n [Where, P = Present value


R = Annual interest rate


n = Time in years]


∴ A = 5000 (1 + 8/100)2


⇒ A = 5000 (1 + 2/25)2


⇒ A = 5000 (27/25)2


⇒ A = 5000 × 27/25 × 27/25


⇒ A = 200 × 27 × 27/25


⇒ A = 8 × 27 × 27


⇒ A = 5832


∴ Amount = Rs.5832


∴ Compound interest = Rs.(5832 – 5000) [∵CI = A – P]


= Rs.832

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