A sum lent out at compound interest amounts to Rs. 1,250 in one year and to Rs. 1,458 in 3 years at a certain rate percentage p.a. What is the simple interest on the same sum for 5(2/5) years at the same rate of interest?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is Option 2 i.e. Rs.500
| Application | Understanding |
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The principal 'P' at the rate of interest 'r' becomes A after 't' years. ⇒ A = P(1 + r/100)t |
After 1 year, ⇒ 1250 = P(1 + r/100) After 3 years, ⇒ 1458 = P(1 + r/100/)3 Dividing both equations ⇒ 729/625 = (1 + r/100)2 ⇒ 27/25 = 1 + r/100 ⇒ r/100 = 2/25 ⇒ r = 8% ⇒ 1250 = P(1 + 8/100) ⇒ P = Rs. 31250/27 |
| Simple interest = (P × r × t)/100 |
Simple interest = (31250 × 8 × 27)/(5 × 100 × 27) ⇒ Simple interest = Rs. 500 |