Question

If at the rate of \(12 \frac{1}{2}\%\) per annum for 2 years the compound interest is Rs. 510/-. What will be the simple interest on the same amount for the same period at the same rate of interest?
1. Rs. 400/-
2. Rs. 450/-
3. Rs. 460/-
4. Rs. 480/-

Answer 1

Correct Answer - Option 4 : Rs. 480/-

Given:

At the rate of \(12 \frac{1}{2}\%\) per annum for 2 years the compound interest is Rs. 510.

Concept used:

If the compound interest rate is ' x ' % per annum then 

Total interest after 2 years = [x + x + (x × x) 100]%

Calculations:

Let the principle be P

Total % interest after 2 years = 12.5 + 12.5 + [(12.5 × 12.5)/100]

⇒ (425/16)%

According to the question

(425/16)% of P = 510

⇒ P = 1920 rupees

Interest rate for 2 years with simple interest = 12.5 + 12.5 = 25% 

Total interest for 2 years = 25% of 1920

⇒ 480

∴ The correct choice is option 4.