Nikita invested Rs. 8000 for 3 years at 5 % CI in a post office. If the interest is compounded o

Step 1: Identify the formula for compound interest. The formula to calculate the amount ( A ) af

Nikita invested Rs. 8000 for 3 years at 5 % CI in a post...

Nikita invested Rs. 8000 for 3 years at $5 \% \mathrm{CI}$ in a post office. If the interest is compounded once in a year, what sum will she get after 3 years?
(a) Rs. 9261
(b) Rs. 8265
(c) Rs. 9365
(d) None of these

Key Concepts

Compound Interest

Compound interest is the process of calculating interest on both the initial principal and the interest that accumulates over previous periods. This method results in a snowball effect where the amount grows at a progressively increasing rate, which differs from simple interest where only the principal earns interest.

Compounding Frequency

Compounding frequency refers to the number of times the interest is calculated and added to the principal within a specific period. The more frequent the compounding, the greater the final amount will be. In this case, the interest is compounded annually, meaning it is added once per year.

Interest Rate

The interest rate is the percentage at which the principal amount grows per compounding period. A rate of 5% per annum means that every year, the principal increases by 5% of its value, thereby contributing to the compound growth.

Principal Amount

The principal amount represents the initial sum of money that is invested or borrowed before any interest is applied. It serves as the base amount from which compound interest is calculated over time.

Exponential Growth

Exponential growth occurs when increases occur by a constant percentage over consistent time intervals. In the context of compound interest, this means that the investment grows faster over time as interest is earned on both the original principal and the accumulated interest from previous periods.

Please give Ace some feedback