Question

the simple interest on a certain sum of money for two years at 6% per annum is Rs 900. what will be the compound interest on that sum at the same rate and for the same period?

Answer 1

Rs 927.

Explanation:

For simple interest we have:

I = PRT/100 where I = interest, P = amount invested, R = the rate and T = the time.

900 = P*6* 2 / 100

P = 900*100/ 12

P = Rs 7500

The formula for the amount after t years when investing P amount at a rate of r% is:

A = P(1 + r/100)^t

A = 7500(1 + 6/100)^2

= Rs 8427.

So the compound interest is 8427 - 7500

= Rs 927.