Question

If the simple interest on a sum of money at 5% per annum for 3 years is Rs. 1200 then the compound interest on the same sum for the same period at the same rate will be 

A. Rs. 1225 

B. Rs. 1236 

C. Rs. 1248 

D. Rs. 1261

Answer 1

Interest rate, R = 5% per annum 

Time = 3 years 

Simple interest = Rs.1200 

Simple interest = PRT/100 

⇒ 1200 = (P × 5 × 3)/100 

⇒ 1200 = P × 15/100 

⇒ P = 1200 × 100/15 

⇒ P = 8000 

Now, 

Amount (A) = P (1 + R/100)ⁿ = 8000 (1 + 5/100)³ 

= 8000 (1 + 1/20)³ 

= 8000 (21/20)³ 

= 8000 × 9261/8000 

= 9261 

∴ Amount = 9261 

∴ Compound interest = Rs.(9261 – 8000) [∵CI = A – P] 

= Rs.1261