Question
Rs. 2500 is invested in scheme ‘A’ for a year at
simple interest of 25% p.a. The interest received from scheme ‘A’ is reinvested for 2 years in scheme ‘B’ which offers compound interest (compounded annually) of 20% p.a. What is the total amount received from scheme ‘B’?Solution
Calculate the simple interest from scheme A Principal (P) = ₹2500 Rate of interest (R) = 25% per annum Time (T) = 1 year The formula for simple interest is: 
Substitute the values: 
The interest received from scheme A is ₹625.
Reinvest the interest in scheme B at compound interest Principal for scheme B = ₹625 (interest received from scheme A) Rate of interest (R) = 20% per annum Time (T) = 2 years The formula for compound interest (compounded annually) is: 
Substitute the values: 
The total amount received from scheme B is ₹900.
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