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Example – 6. A person invests Rs. 10,000 for two years at a certain rate of interest compounded annually. At the end of one year the sum amount to Rs. 11,200. Calculate:

1. The rate of intersect per annum
2. The amount at the end of second year.

Solution :

(i) P = Rs.10,000, A = Rs.11,200, T = 1 year
I = A – P = Rs. (11,200 – 10,000)
= Rs. 1200

(ii) Principal for the second year = Rs. 11,200

The amount at the end of the second year
= Rs. (11,200 + 1,344)
= Rs. 12,544