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A sum of Rs. 800 amounts to Rs. 1120 in 4 years. What will it amount, if the rate of interest is increased by 5%?
1. Rs. 1200
2. Rs. 1208
3. Rs. 1240
4. Rs. 1280

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Correct Answer - Option 4 : Rs. 1280

Given:

Amount = Rs. 1120

Principle = Rs. 800

Time (T) = 4 years

Concept:

Simple interest is the interest calculated on the principal portion of the loan or the original contribution to the saving account.

Formula Used:

Simple Interest = (P × R × T)/100

Calculation: 

Simple interest = 1120 - 800 = Rs. 320

Simple Interest = (P × R × T)/100

⇒ 320 = (800 × R × 4)/(100)

⇒ R = 320/32 = 10%

New rate = 10 + 5 = 15% 

Simple Interest = (800 × 15 × 4)/100 = 480

So, Amount = 800 + 480 = Rs. 1280

∴ The new amount when rate is increased by 5% is Rs. 1280.

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