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    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.
    A Rs.1320 Correct Answer Incorrect Answer
    B Rs.1220 Correct Answer Incorrect Answer
    C Rs.1052 Correct Answer Incorrect Answer
    D Rs.2500 Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    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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