Surabhi borrowed a sum of Rs 12000 from a finance company to purchase a refrigerator.

Question:

Surabhi borrowed a sum of Rs 12000 from a finance company to purchase a refrigerator. If the rate of interest is 5% per annum compounded annually, calculate the compound interest that Surabhi has to pay to the company after 3 years.

Solution:

$\mathrm{A}=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)^{\mathrm{n}}$

$=12,000\left(1+\frac{5}{100}\right)^{3}$

$=12,000(1.05)^{3}$

$=13,891.50$

Thus, the required amount is Rs $13,891.50$.

Now,

$\mathrm{CI}=\mathrm{A}-\mathrm{P}$

$=\mathrm{Rs} 13,891.50-\mathrm{Rs} 12,000$

$=\mathrm{Rs} 1,891.50$

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