A man got 10% of his investment as profit. If he invested Rs. 5000, and the profit was reinvested, what will be the total value after the second year with the same profit rate?
Rs. 6050
Since the profit is reinvested each year at the same rate, the value grows like compound interest at \(10\%\) per year on the principal of Rs. 5000.
After the first year, the value becomes \(5000 \times \left(1 + \frac{10}{100}\right) = 5000 \times 1.1 = 5500\).
This Rs. 5500 is now reinvested at the same rate, so after the second year the value becomes \(5500 \times 1.1 = 6050\).
Equivalently, \(5000 \times (1.1)^2 = 5000 \times 1.21 = 6050\).
Hence, the total value after the second year is Rs. 6050.
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