Ramu invested some money in HDFC at 4% per annum rate of interest. What would be the corresponding simple interest (in ₹) if after 2 years, Ramu got ₹127.5 as compound interest, considering annual compounding?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3 i.e. 125
Let principal = P, Rate = 4% per annum , Time = 2 years
Compound Interest = 127.5
CI = P × (1 + R/100)2 − P
127.5 = P × (1 + 4/100)2 − P
127.5 = P × 1.0816 − P
127.5 = 0.0816 × P
P = 127.5 ÷ 0.0816 = 1562.5
Simple Interest = (P × R × T) ÷ 100
SI = (1562.5 × 4 × 2) ÷ 100 = 125