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An amount P will result in a balance of P(1+i) after an interval in which the interest rate is i. After two such intervals, the balance will be P(1+i)2. After 365 compounding intervals, the balance will be P(1+i)365.
The interest rate for one day is going to be 1/365 times the interest rate for the year
i = .07/365, so
balance = P(1+.07/365)365
balance = rs.5000*(1.0725) = rs.5362.50
From one year to the next, the formula works the same way. After 2 years the balance will be
balance = rs.5000*(1.0725)2 = rs.5000*(1.15025625) = rs.5751.28.
answered 3 months ago
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