Amount at the end of first year = P + PRT/100 = 1000 + (1000 × 1 × 4)/100 = Rs. 1040 The formula for CI at annual compound interest, including principal sum, is: CI=P(1+
r
100
)t−P Where: CI = Compound Interest P = the principal investment amount (the initial deposit or loan amount) r = the annual interest rate (decimal) t = the number of years the money is invested or borrowed CI = 1040(1 + 4/100)2 - 1040 CI = Rs. 84.864 Total interest = 84.864 + 40 = Rs. 124.864 ≈ Rs. 125