Question

The simple interest on a certain sum at the rate of 20% per annum for 4 years is Rs. 1600. Find the compound interest on the same sum at the rate of 20% per annum for 4 years.

1. 2147.2
2. 2,347.2
3. 2,247.2
4. 2,447.2

Answer 1

Correct Answer - Option 1 : 2147.2

Given:

Simple interest = Rs. 1600, at the rate of 20% and time = 4 years

Formula used:

If P = Principal, R = Rate of Interest, and T = Time Period; then:

Simple interest = (P × R × T)/100, and

Compound interest =  P(1 + R/100)t - P

Calculation:

1600 = (P × 20 × 4)/100

⇒ P = 2,000

Now,

C.I = 2,000[(1 + 20/100)⁴ - 1]

⇒ 2,000 × [1.0736] = Rs. 2,147.2

∴ The compound interest is Rs. 2,147.2.