Question 31

The simple interest accrued on an amount of Rs. 16,500 at the end of three years is Rs. 5,940. What would be the compound interest accrued on the same amount at the same rate in the same period? (rounded off to two digits after decimal)

Solution

Principal amount = Rs. 16,500

Simple interest earned = Rs. 5,940 and time = 3 years

Let rate of interest = $$R \%$$

=> $$S.I. = \frac{P \times R \times T}{100}$$

=> $$5940 = \frac{16500 \times R \times 3}{100}$$

=> $$R = \frac{5940}{165 \times 3}$$

=> $$R = 12 \%$$

Now, compound interest accrued on the same amount at the same rate in the same period = $$P [(1 + \frac{R}{100})^T - 1]$$

= $$16,500 [(1 + \frac{12}{100})^3 - 1]$$

= $$16,500 [(\frac{28}{25})^3 - 1] = 16,500 (\frac{21952 - 15625}{15625})$$

= $$16,500 \times \frac{6327}{15625} = Rs. 6681.31$$


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