# Application of Compound Interest Formula

There are some situations, we use CI formula. Here are a few :

• In a production unit, rate of growth of a product
• To determine population growth (increase or decrease)

Example

The present population of a town is 28000. If it increases at the rate of 5% per annum, what will be its population after 2 years?

Solution

Example

The cost of a machine is Rs. 175000. After one year the value of that machine was depreciated by 5%. Find the value of machine after one year.

Solution

Principal = Rs. 175000

Reduction = 5% of Rs. 1,75000 per year

Value at the end of 1 year = Rs. 1,75000 - Rs. 8750 = Rs. 1,66,250

Alternate method:
Value at the end of 1 year

= Rs. 1,66,250