# Examples of Compound Interest

Example 01:
Find the compound amount and compound interest on the principal 20,000 borrowed at 6% compounded annually for 3 years.
Solution:
Let P = 20000, r = 6%, n = 3
using formula
${\text{A}} = {\text{P}}{\left( {1 + {\text{r}}} \right)^n} = 20000{\left( {1 + .06} \right)^3} = 23820.32$
Compound interest $= 23820.32 - 20000\,\,\,\,\, = 3820.32$

Example 02:
Find the compound amount, which would be obtained from an interest of Rs.2000 at 6% compounded quarterly for 5 years.
Solution:
Let Principal = 2000, $r = 6\% = \frac{6}{{4 \times 100}} = .015$, $n = 5 \times 4\,\,\,\,\, = 20\,{\text{quarters}}$

Example 03:
Find compound interest on Rs.2500 invested at 6% per annually, compound semi-annually for 8 years.
Solution:
Let Principal = 2500, $r = 6\% = 0.06\,\,\,\,\frac{6}{{16}} = 0.03$, $n = 8 \times 2 = 16$
We know that
${\text{A}} = {\text{P}}{\left( {1 + {\text{r}}} \right)^n} = {\text{2500}}{\left( {1 + .03} \right)^{16}} = 4011.73$

Compound interest $= 4011.73 - 2500 = 1511.73$