Question

The simple interest on certain sum of money is Rs. 4096 for 4 years at the rate of 12.5% per annum. What will be the compound interest if the same sum of money is kept for 2 years at same rate of interest compounded annually?

1. Rs. 2657
2. Rs. 1857
3. Rs. 2176
4. Rs. 3258

Answer 1

Correct Answer - Option 3 : Rs. 2176

Given:

I = Rs. 4096

R = 12.5% p.a.

N = 4, 2 years

Formula used:

I = P × R × N/ 100

A = P × (1 + (R/ 100))^N

Where, P = Principal amount, R = Rate of interest, N = number of years and I = Simple interest

Calculation:

Here, I = 4096

⇒ 4096 = P × 12.5 × 4/ 100

⇒ P = 4096 × 100/ (4 × 12.5)

⇒ P = 8192

Now, using P for calculating compound interest

⇒ A = 8192 × (1.125)²

⇒ A = 8192 × 9 × 9/ (8 × 8)

⇒ A = 10368

⇒ I = 10368 – 8192

∴ Compound interest obtained is Rs. 2176