# If 5000 is loaned at 10% per annum compound interest , what is the principal at the beginning of second year?

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### 1 Answer

When 5000 is loaned at an interest rate of 10% per annum compounded annually, the principal increases every year by an amount equal to the interest earned on the principal in the last period.

The interest earned on 5000 in the first year is 5000*10/100 = 500.

**The principal at the beginning of the second year is 5500.**