Q. 13.9( 10 Votes )

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Answer :

In simple interest, interest charge on investment or principal money.

In Compound Interest, Interest charge on principal + Accumulated Interest.


Balance after completing 1 years=Balance in the starting + interest after 1 years


For calculating Interest =


First Year’s balance= 25000Rs


First Year’ Interest =


= 2000


Now, balance after the first year= First Year’s balance +First Year’s Interest


= 25000+2000


= 27000Rs


Second Year’s Balance= 27000Rs


Second Year’s Interest=


= 2160Rs


Balance after the second year = Second Year’s Balance + Second Year’s Interest


= 27000+2160


= 29160Rs


In this question we were calculating compound interest, as I mention above interest charge on principal or investment. As you can see I am adding interest in principal value to calculate next year interest.


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