There is a 60% increase in an amount in 5 years at simple interest. What will be the compound interest on Rs. 6,250 for two years at the same rate of interest, when the interest is compounded yearly?
1. Rs. 1,500
2. Rs. 1,590
3. Rs. 1,560
4. Rs 1480
1. Rs. 1,500
2. Rs. 1,590
3. Rs. 1,560
4. Rs 1480
Correct Answer – Option 2 : Rs. 1,590
Given:
A Simple Interest on a particular sum is 60% of the principle in 5 years.
Let P be the principle and R% is the rate of interest p.a.
Formula Used:
Simple Interest ( S.I ) = ( P× R× T )/ 100
Where P = Principle, R = Rate of interest, T = time period
Compound Interest ( C.I ) = P(1 + R/100)T – P
Where P = Principle, R = Rate of interest, T = time period
Calculations:
⇒ As from the given formula
S.I for 5 years = 60%× P = P× R%× 5
⇒ R% = 60% / 5 = 12% ____( 1 )
As 12% = ( +3/25) = 28/25
⇒ C.I = 6250( 1 + 12/100 )2 – 6250
(∵ Principle is given = Rs 6250 )
⇒ C.I = 6250 (28/25)2 – 6250 = 6250× 784/625 – 6250
( As 282 = 784, 252 = 625 )
C.I = 7840 – 6250 = Rs 1590