Discussion
At the end of three years what will be the compound interest at the rate of 10% p.a. on an amount of Rs.20000?
Answer: A
\[ A = P\left(1 + \frac{R}{100}\right)^{n}, \qquad \text{CI} = A - P, \qquad \text{SI} = \frac{PRn}{100} \]
\[ \text{CI} = 20000\left[(1.1)^{3} - 1\right] = 20000(1.331 - 1) \]
\[ = 20000 \times 0.331 = \text{Rs. } 6620 \]
Simple interest would be Rs. 6000; the extra Rs. 620 is the compounding. The multiplier \( 1.1^{3} = 1.331 \) is worth memorising, as it appears constantly in these questions.
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