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Question -

What will Rs 500 amounts to in 10 years after its deposit in a bank whichpays annual interest rate of 10% compounded annually?



Answer -

Given,

The amount depositedin the bank is Rs 500.

At the end of firstyear, amount = Rs 500(1 + 1/10) = Rs 500 (1.1)

At the end of 2nd year,amount = Rs 500 (1.1) (1.1)

At the end of 3rd year,amount = Rs 500 (1.1) (1.1) (1.1) and so on….

Therefore,

The amount at the endof 10 years = Rs 500 (1.1) (1.1) … (10 times)

= Rs 500(1.1)10

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