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      Question

      Rs. 2500 is invested in scheme β€˜A’ for a year at

      simple interest of 25% p.a. The interest received from scheme β€˜A’ is reinvested for 2 years in scheme β€˜B’ which offers compound interest (compounded annually) of 20% p.a. What is the total amount received from scheme β€˜B’?
      A Rs. 910 Correct Answer Incorrect Answer
      B Rs. 920 Correct Answer Incorrect Answer
      C Rs. 900 Correct Answer Incorrect Answer
      D Rs. 930 Correct Answer Incorrect Answer

      Solution

      Calculate the simple interest from scheme A Principal (P) = β‚Ή2500 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 β‚Ή625.

      Reinvest the interest in scheme B at compound interest Principal for scheme B = β‚Ή625 (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 β‚Ή900.

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