Question

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

Answer 1

The amount deposited in the bank is Rs 500.

At the end of first year, amount =  = 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

∴Amount at the end of 10 years = Rs 500 (1.1) (1.1) … (10 times)

= Rs 500(1.1)¹⁰