Question 66

The simple interest on a sum of ₹50,000 at the end of two years is ₹4,000. What would be the compound interest on the same sum at the same rate for the same period ?

Solution

Principal(p) = 50000

Interest(i) = 4000

Time(t) = 2 years

Interest = $$\frac{p \times r \times t}{100}$$

r = $$\frac{4000 \times 100}{50000 \times 2}

r = 4%

Compound interest = $$p(1 + r/100)^t - p$$ = 50000(1 + 4/100)^2 - 50000$$

= 50000 \times (104/100) \times (104/100) - 50000 = 54080 - 50000

= 4080

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