The principal increases by 14% in 2 years at simple interest, what will be the compound interest earned (in Rs) on Rs10,000 in 3 years at the same rate?
1. Rs.2250.90
2. Rs.2250.43
3. Rs.2250
4. Rs.2350.43
1. Rs.2250.90
2. Rs.2250.43
3. Rs.2250
4. Rs.2350.43
Correct Answer – Option 2 : Rs.2250.43
Given:
Time (T) = 2 years
Time (n) = 3 years
Formula used:
S.I. = (P × R × T)/100
A = P(1 + R/100)n
Where A → amount
n → time
S.I. → Simple Interest
P → Principal
R → Rate
T → Time
Calculations:
Let the principal be Rs. P and the rate be R p.a.
The principal after 2 years = P + 14P/100
According to the question,
P + 14P/100 = P + (P × R × 2)/100
⇒ 1 + (14/100) = R/50
⇒ R = 50 × (14/100) = 7%
Now
A = 10000(1 + 7/100)3
⇒ A = 10000 × (107/100) × (107/100) × (107/100)
⇒ A = Rs.12250.43
Thus C.I. = 12250.43 – 10000 = Rs.2250.43
∴ The compound interest earned on Rs10,000 in 3 years is Rs.2250.43.