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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.
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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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