Question

There is a 60% increase in an amount in 5 years at simple interest. What will be the compound interest on Rs. 6,250 for two years at the same rate of interest, when the interest is compounded yearly?
1. Rs. 1,500
2. Rs. 1,590
3. Rs. 1,560
4. Rs 1480

Answer 1

Correct Answer - Option 2 : Rs. 1,590

Given:

A Simple Interest on a particular sum is 60% of the principle in 5 years.

Let P be the principle and R% is the rate of interest p.a.

Formula Used:

Simple Interest ( S.I ) = ( P× R× T )/ 100

Where P = Principle, R = Rate of interest, T = time period

Compound Interest ( C.I ) = P(1 + R/100)^T – P

Where P = Principle, R = Rate of interest, T = time period

Calculations:

⇒ As from the given formula

  S.I for 5 years = 60%× P = P× R%× 5

⇒ R% = 60% / 5 = 12%      ____( 1 )

As 12% = ( +3/25) = 28/25

⇒ C.I = 6250( 1 + 12/100 )² – 6250

(∵ Principle is given = Rs 6250 )

⇒ C.I = 6250 (28/25)² – 6250 = 6250× 784/625 – 6250

( As 28² = 784, 25² = 625 )

C.I = 7840 – 6250 = Rs 1590