Question
The simple interest on a sum of money for 4 years at 8%
per annum is ₹1,280. What will be the compound interest on the same sum at the same rate of interest for 2 years, compounded annually?Solution
Simple interest for 4 years = ₹1,280 Simple interest for 1 year = ₹1,280 ÷ 4 = ₹320 Principal = (Simple interest × 100) ÷ (Rate × Time) = (320 × 100) ÷ (8 × 1) = ₹4,000 For compound interest: A = P(1 + r/100)^t A = 4000(1 + 8/100)^2 = 4000(1.08)^2 = 4000 × 1.1664 = ₹4,665.6 Compound interest = A - P = ₹4,665.6 - ₹4,000 = ₹665.6 ≈ ₹666 Correct Option: b) ₹666
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