Find the compound interest on Rs.8000 for 3 years at 5% per annum.
Principal for the first year = Rs.8000 Rate = 5% per annum T = 1 year
Interest for the first year = P×R×T100=Rs.[8000×5×1100]=Rs.400
∴ Amount at the end of the first year =Rs.(8000+400)=Rs.8400
Now principal for the second year = Rs. 8400
Interest for the second year = P×R×T100=Rs.[8400×5×1100]=Rs.420
∴ Amount at the end of the second year = Rs. (8400 + 420) = Rs.8820
Interest for the third year = P×R×T100=Rs.[8820×5×1100]=Rs.441
∴ Amount at the end of the third year =Rs.(8820+441)=Rs.9261
Now we know that total C.I. = Amount - Principal =Rs.(9261−8000)=Rs.1261
We can also find the C.I. as follows
Total C.I. = Interest for the first year + Interest for the second year + Interest for third year =Rs.(400+420+441)=Rs.1261