Question

The simple interest on a sum of money for 2 years at 12% per annum is rupees 1380

(i) find the sum of money
(ii) the compound interest on this sum for 1 year payable half-yearly at the same rate. ​

Answer 1

5750

710.7

Explanation:

Simple interest = principal. * rate * time

Principal (p) = sum of money

1380 = p * 0.12 * 2

1380 = 0.24p

p = 1380 / 0.24

p = 5750 rupees.

The compound interest :

A = P(1 + r/n)^nt

A = final amount

n = number of compounding times per period

t = period

A = 5750(1 + 0.12/2)^2*1

A = 5750(1 + 0.06)^2

A = 5750(1.06)^2

A = 5750 * 1.1236

A = 6460.7

Hence, compound interest is :

Final amount - principal

6460.7 - 5750

= 710.7 rupees