-     P  ( 1 + R  ) T = Amount     100         P ( 1 + 12 ) 2  = 4390.40       100             P ( 112  ) 2  = 4390.40       100             P = 
43904000  = 3500.     112 x 112
   

Compound interest is interest that is calculated not only on the initial principal amount but also on the accumulated interest of previous periods. In other words, compound interest is interest on interest.

The compound interest formula is given by
\begin{equation}
A = P \times \left( 1 + \frac{r}{n} \right)^{nt}
\end{equation}

Where,
A = Total amount
P = Principal amount
r = Interest rate
n = Number of times the interest is compounded per year
t = Time (in years)

In the given problem,
Principal Amount (P) = Rs. 3500
Interest Rate (r) = 12%
Number of times the interest is compounded (n) = 1 (annually)
Time (t) = 2

Substituting the above values in the compound interest formula,
A = 3500 x (1 + 0.12/1)2
A = 3500 x (1.12)2
A = 4390.40

Hence, Rs. 3500 will grow to Rs. 4390.40 in 2 years at 12% compounded annually.

If you think the solution is wrong then please provide your own solution below in the comments section .