Question

The simple interest on a certain sum of money at 4% p.a. for 2 years is Rs1500. What will be the compound interest on the same sum for the same time?

Answer 1

Since, Simple interest 
= `("P" xx "r" xx "t")/(100)`

⇒ 1500 = `("P" xx 4 xx 2)/(100)`

⇒ P = `(150000)/(8)`
= 18750
Now for C.I., P = Rs.18750, r = 4%, t = 2 year
Here P₁ = Rs.18750 and r = 4%
So, Amount after 1 year
= `"P"(1 + "r"/100)`

= `18750(1 + 4/100)`

= `18750 xx (104)/(100)`
= 19500
Thus, P₂ = Rs.19500 and r = 4%
Amount after 2 year
= `"P"(1 + "r"/100)`

= `19500(1 + 4/100)`

= `19500 xx (104)/(100)`
= 20280
Hence, Amount = Rs.20280
Also, C.I.
= A - P
= Rs.20280 - Rs.18750
= Rs.1530.