Question

Sudha borrowed a sum of money from bank. If the simple interest on that sum for 2 years at 5% per annum is Rs. 40, what is the compound interest on the same at the same rate and for the same time?

1. Rs 41
2. Rs 40
3. Rs 84
4. Rs 46
5. None of these 

Answer 1

Correct Answer - Option 1 : Rs 41

Given:

Rate = 5%

Simple interest = 40

Formula:

Simple Interest = Principal × Rate × Time/100​

Amount = P(1 + R/100​)ⁿ

Calculations:

Let the sum = P Rs.

S.I = 40 Rs.

Rate of interest = 5 %

Time = 2 years.

Simple Interest = Principal × Rate × Time/100​

⇒ 40 = P × 5 × 2/100​

⇒ P = (40 × 100)/(5 × 2)

​⇒ 400 Rs.

C.I. of 400 Rs

Amount = 400(1 + 5/100​)²

⇒ 400 × 105/100 ​× 105/100​

⇒ 400 × 21/20 ​× 21/20​

⇒ 441

Compound Interest = 441 – 400 = 41Rs.

∴ The compound interest is Rs 41