Find the amount of Rs. 10000 after 2 years compounded annually; the rate of interest being 10% per anum during the first year and 12% per annum during the second year. Also, find the compound interest.
Present value = Rs.10000
Interest rate for 1st year, p = 10 % per annum
Interest rate for 2nd year, q = 12 % per annum
Time = 2 years
Amount (A) = P × (1 + p/100) × (1 + q/100)
A = 10000 × (1 + 10/100) × (1 + 12/100)
= 10000 × (1 + 1/10) × (112/100)
= 10000 × 11/10 × 112/100
= 10 × 11 × 112
= 12320
∴ Amount = Rs.12320
∴ Compound interest = Rs.(12320 – 10000)
= Rs.2320