Compound Interest with Increasing Rate
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2. Mr. Bantawa borrowed a sum of Rs. $1,00,000$ from Agricultural Development Bank for $3$ years to upgrade his poultry farming. the bank charged $5\%$ interest compounded annually for the first year and the rate of interest was gradually increased by $1\%$ every year. How much interest did he pay at the end of third year?
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Step by Step Written Solution
Let's solve this compound interest problem where the interest rate changes every year. We are asked to find the total interest Mr. Bantawa paid after three years.
Compound Interest Analysis
First, let's list the known values. The principal amount P is one hundred thousand rupees. The total time T is three years.
The interest rate for the first year is five percent. The problem states that it increases by one percent every year thereafter.
When the interest rate varies annually, we can calculate the final amount using this compound interest formula for different rates.
The Formula
Now, let's plug in our values into the formula.
Simplifying the fractions inside the parentheses gives us one point zero five, one point zero six, and one point zero seven.
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