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Where A = amount, P = principal, r = rate of interest per annum and n = no. of years

Then use the formula for compound interest given by Compound Interest = Amount - Principal

This will give us the required answer.

The amount on which the interest is calculated is the principal and is denoted by P.

Thus, we have principal = P = ₹1000

Rate of interest = 10% per annum

The period of interest (in years) = 3 years

We can see that these conditions are satisfied here.

Let us write down the formula for calculating compound interest.

Compound Interest = Amount - Principal………….equation (1)

Thus, it can be seen that to calculate the compound interest, one needs to compute the amount first.

And the formula for computing this amount is as follows:

$A = P{(1 + \dfrac{r}{{100}})^n}$

Where A denotes the amount

So, let us quickly plug in the values of P, r and n in the above formula.

Thus, we get

\[ A = P{(1 + \dfrac{r}{{100}})^n} \\

= 1000{(1 + \dfrac{{10}}{{100}})^3} \\

= 1000{(1 + 0.01)^3} \\

= 1000{(1.01)^3} \\

= 1000 \times 1.030301 \\

= 1030.301 \\ \]

So, the amount is ₹1030.301.

Now, substitute the values of amount and principal in equation (1).

Then, we have compound interest = 1030.301 - 1000 = 30.301

Hence the required compound interest is ₹30.301.

That is, one must remember that for such questions, we need to have an annual rate of interest and the period of interest must also be expressed in years.

If it is not the case, you can always convert them into the required format by dividing the rate of interest by 12 to obtain the annual rate and by dividing the given period by 12 to get the no. of years.

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