Read the situation: a teacher borrowed Rs. 5,00,000 from a commercial bank for 2 years at 12% per annum. He could not pay the interest at the end of the first year, so in the second year he had to pay interest on the first year's interest as well.
Discuss the questions below in your group.
Present your conclusion to the class.
Discussion
How much interest is to be paid in the first year?
What is the principal of the second year? Find it.
How much interest should be paid for the second year?
Why is there a difference between the interest for the first year and for the second year?
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