Question
A certain amount becomes Rs. 4200 in 4 years and Rs. 4800
in 6 years at simple interest. Find the interest earned if the same sum is invested at 20% p.a. compound interest, compounded annually for 2 years.Solution
ATQ,
Simple interest earned in two years = 4800 – 4200 = Rs. 600
Simple interest earned in 1 year = Rs. 300
So, sum invested = 4200 – 4 × 300 = 4200 – 1200 = Rs. 3000
Desired interest = [(1.20)² – 1] × 3000 = 0.44 × 3000 = Rs. 1320
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