Question
Rs. P invested at R% p.a. gives simple interest and compound interest (compounded annually) of Rs. 640 and Rs. 665.60 respectively at the end of 2 years. Find the compound interest (compounded annually) earned if Rs. (P + 1000) is invested at (R + 4)% p.a. for 2 years.
Solution
Simple interest for one year = 640/2 =Rs. 320 Difference between compound interest and simple interest for 2 years = 665.6 – 640 = Rs. 25.60 So, R = 25.6/320 × 100 = 8% And, P = 320/0.08 = Rs. 4000 Desired interest= [(1.12)2 – 1] × 5000 = Rs. 1272
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