How much money must you deposit in a savings account today to have Rs. 20000 in 20 years if the interest rate 7% compounded annually?

Answers

Answer 1

You must deposit Rs. 6122 into a savings account today.

Equation:-

Assuming that Principal (P) = 20000

A = P[1+(R/100)] where Rate (R) = 7 and Number of Years (n) = 20.

ⁿ\s= 20000[1+(7/100)]

²⁰\s= 20000[1+(1/7)]

²⁰\s= 2000[(7+1)/7]

²\s= 20000 X (8/7) X (8/7)\s= 26122

Total Amount, A = 26122 Rupees

Compound Interest (CI) equals A-P = Rs. 26122 x 20 000 = Rs. 6122

What does the term "compound interest" mean?

The interest you earn on interest is known as compound interest. Simple math may be used to demonstrate this: if you have $100 and it generates 5% interest annually, you will have $105 at the end of the first year. You'll have $110.25 after the second year is over.

What is meant by the phrase "compound interest"?

Compound interest is the term for interest that is earned on interest. This may be shown using simple math: if you start with $100 and it earns 5% interest every year, you will have $105 at the end of the first year. After the second year, you'll have $110.25.

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