If an increase of 40% is observed on an amount in 4 years at simple interest, what will be the compound interest on ₹ 80,000 after 4 years at the same rate of interest?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. ₹ 37,128.
Let the principal (P) be 100x
Time (T) = 4 years
Sum = 140% of 100x = 140x
Interest = Sum - Principal = 140x - 100x = 40x
Now,
Simple interest = (Principal × Rate × Time)/100
⇒ 40x = (100x × rate × 4)/100
⇒ Rate (R) = 10%
Compound interest = P(1 + R/100)T - P
⇒ 80000(1 + 10/100)4 - 80000
⇒ 80000(11/10)4 - 80000
⇒ 117128 - 80000
⇒ 37128