Single correct option
A sum of money invested at compound interest (compounded annually) amounts to Rs 8,820 in 2 years and to Rs 9,261 in 3 years. What simple interest would the same sum earn in 4 years at the same rate?
- A. Rs 1,500
- B. Rs 1,680
- C. Rs 1,600
- D. Rs 1,764
Show answer and solution
Answer: (C) Rs 1,600
Amount grows by the factor (1 + r) each year: 9261/8820 = 1.05, so r = 5%.
Principal P = 8820/(1.05)² = 8820/1.1025 = Rs 8,000.
Simple interest for 4 years = 8000 × 5 × 4/100 = Rs 1,600.
Rs 1,764 is the 4-year CI-style trap (it uses compounding); Rs 1,680 uses 8,400 as principal (the 1-year amount).
Principal P = 8820/(1.05)² = 8820/1.1025 = Rs 8,000.
Simple interest for 4 years = 8000 × 5 × 4/100 = Rs 1,600.
Rs 1,764 is the 4-year CI-style trap (it uses compounding); Rs 1,680 uses 8,400 as principal (the 1-year amount).
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