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Find the Sum Invested at 8% P.A. Compound Interest on Which the Interest for the Third Year Exceeds that of the First Year by Rs 166.40.

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Question

Find the sum invested at 8% p.a. compound interest on which the interest for the third year exceeds that of the first year by Rs 166.40.

Sum
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Solution

Let the sum be P

Interest for first year :

`"P" (1 + 8/100) - "P"` ...............(i)

Interest for third year :

`"P" (1 + 8/100)^3 - "P"(1 + 8/100)^2` ..............(ii)

Subtracting (ii) from (i) 

`"P" (1 + 8/100)^3 - "P"(1 + 8/100)^2 - "P" (1 + 8/100) + "P"` = Rs 166.40

Rs 166.40 = 1.259712 P- 1.1664 P-1.08 P + P

Rs 166.40 = 0. 013312P

P = Rs 12,500 

Hence the sum is Rs 12,500 

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Concept of Compound Interest - Compound Interest as a Repeated Simple Interest Computation with a Growing Principal
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