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Example – 3. Calculate the compound interest for the second year on Rs. 8,000 invested for 3 years at 10% p.a. Also find the sun due at the end of third year.

Solution : P = Rs. 8,000, R = 10% p.a. T = 3 years

Interest for the 1st year
= Rs. 8000 X 10 X 1/100
= Rs. 800

Principal for the second year
= Amount at the end of one year
= Rs. 8000 + Rs. 800
= Rs. 8800

Interest for the second year
= Rs. 8800 X 10 X 1/100
= Rs. 880

Compound interest for second year
= Rs. 880

Principal for the third year
= Amount at the end of two years
= Rs. 8800 + Rs. 880
= Rs. 9680

Interest for the third year
= Rs. 9680 X 10 X 1/100
= Rs. 968

Sum due at the end of third year
= Rs. 9680 + Rs. 968
= Rs. 10,648