Bank interest rate questions
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This is an incomplete question. One needs to know whether the interest was compounded quarterly, annually, monthly, or ...neilcao wrote:2% compound interest,no money put in and out in 10 years,the interests for two years is 5050, what's the original amount of money
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neilcao wrote:2% compound interest,no money put in and out in 10 years,the interests for two years is 5050, what's the original amount of money
I agree with the above post that the period of compounding should be provided, but assuming that the money was compounded annually we can solve it the following way
CI for 2 years = SI for the first year + SI for the 2 nd year on (P + SI of the first year)
5050 = s + 1.02 s
s =2500.
if this were the SI for the first year then the original principle = 125000 Rs considering 2 % interest
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Solution:
Since nothing has been mentioned, we assume that the interest is being compounded annually.
Let the original amount of money be p.
Interest is 2%.
So, the amount after 2 years is p[1 + 2/100]^2 = p[1.02]^2.
The interest will be p[1.02]^2 - p.
Or p[1.02]^2 - p = 5050.
Or p = 5050/[1.02^2 - 1] = 5050/{[1.02+1][1.02 - 1]} = 5050/{2.02*0.02} = 125000.
Since nothing has been mentioned, we assume that the interest is being compounded annually.
Let the original amount of money be p.
Interest is 2%.
So, the amount after 2 years is p[1 + 2/100]^2 = p[1.02]^2.
The interest will be p[1.02]^2 - p.
Or p[1.02]^2 - p = 5050.
Or p = 5050/[1.02^2 - 1] = 5050/{[1.02+1][1.02 - 1]} = 5050/{2.02*0.02} = 125000.
Anurag Mairal, Ph.D., MBA
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