On a sum, simple interest at the annual rate of 12 percent for 6 years is Rs. 28800. What will be the compound interest on the same sum at the annual rate of 20 percent (compounding annually) for 2 years?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Rs. 17600.
Given:
For simple interest:
Rate (R) = 12%
Time (T) = 6 years
Simple Interest (SI) = 28800
For compound interest:
Rate (R) = 20% and time (T) = 2 years
Formula used:
SI = PRT/100 ----- (1)
CI = P(1 + R/100)T - P ---- (2)
Calculations:
Let the sum be P.
Using equation (1), we get
⇒ 28800 = (P × 12 × 6)/100
⇒ P = 40000
Now using, equation (2)
⇒ CI = 40000(1 + 20/100)2 - 40000
⇒ CI = 57600 - 40000 = 17600