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Question

Suppose a specific amount is invested in a Life insurance policy at a simple interest rate of 15% per annum for 2 years, the interest earned amounts to Rs.1,200. However, when the same amount is invested for 2 years at compound interest with a rate of 'a%' per annum, compounded annually, the total amount received after 2 years is Rs.5,760. What is the value of 'a'?

A 25 Correct Answer Incorrect Answer
B 35 Correct Answer Incorrect Answer
C 20 Correct Answer Incorrect Answer
D 45 Correct Answer Incorrect Answer
E none of these Correct Answer Incorrect Answer

Solution

ATQ, Let the sum invested = Rs.‘s’ According to the question, {(s × 2 × 15) ÷ 100} = 1200 Or, s = 1200 ÷ 30 × 100 = 4000 So, 4000 × {(1 + (a/100)}2 = 5760 Or, {(1 + (a/100)}2 = (5760/4000) = 1.44 So, 1 + (a/100) = √1.44 = 1.2 So, a = 0.2 × 100 = 20

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