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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
 


 




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