Question
The difference between the compound interest, compounded
annually and simple interest on Rs. ‘P’ at the rate of 25% p.a. for 2 years, is Rs. 125. If Rs. (P + 2000) is invested at the same rate p.a., then find the compound interest, compounded annually earned after 3 years. MTSolution
Using formula Difference = Sum(R/100)2 Or, 125 = P(25/100)2 Or, 125 = P(625/10000) Or, 0.0625P = 125 Or, P = 2000 Sum that is invested on compound interest = 2000 + 2000 = Rs. 4000 Compound interest = 4000(1 + 25/100)3 – 4000 = 4000 × (5/4) × (5/4) × (5/4) – 4000 = 7812.5 – 4000 = Rs. 3812.5
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