Question
The difference between the compound interest, compounded
annually and simple interest on Rs. ‘P’ at the rate of 20% p.a. for 2 years, is Rs. 100. If Rs. (P + 1000) is invested at the same rate p.a., then find the compound interest, compounded annually earned after 3 years.Solution
Using formula Difference = Sum(R/100)2 Or, 100 = P(20/100)2 Or, 100 = P(400/10000) Or, 0.0400P = 100 Or, P = 2500 Sum that is invested on compound interest = 2500 + 1000 = Rs. 3500 Compound interest = 3500(1 + 20/100)3 – 3500 = 3500 × (6/5) × (6/5) × (6/5) – 3500 = 6048 – 3500 = Rs. 2548
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