Numerical answer
A sum of money earns Rs 420 as compound interest in 2 years at 10% per annum, compounded annually. What would be the simple interest (in Rs) on the same sum for 3 years at 8% per annum?
Show answer and solution
Answer: 480
CI for 2 years at 10% = P[(1.1)² − 1] = 0.21P.
So 0.21P = 420, giving P = 2000.
SI for 3 years at 8% = 2000 × 8 × 3/100 = 480.
Tip: Memorise the 2-year CI factor 2r + r²/100: at 10% it is 21%, at 20% it is 44%. It saves time on questions that give CI and ask for the principal.
So 0.21P = 420, giving P = 2000.
SI for 3 years at 8% = 2000 × 8 × 3/100 = 480.
Tip: Memorise the 2-year CI factor 2r + r²/100: at 10% it is 21%, at 20% it is 44%. It saves time on questions that give CI and ask for the principal.
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