A principal amount increases by 50% in five years at simple interest. At the same rate of interest, what will be the compound interest on ₹20000 for three years?
Answer & explanation
Correct answer: option 1
A principal amount increases by 50% in five years at simple interest.
Simple interest per year = \(\frac{50% }{5 }\) = 10%
With compound interest ,
Amount = Principal × ( 1 + \(\frac{rate }{100 }\) )t
= 20000 × ( 1 + \(\frac{10 }{100 }\) )3
= 20000 × \(\frac{11 }{10 }\) × \(\frac{11 }{10 }\) × \(\frac{11 }{10 }\)
= Rs. 26620
We know , Amount = Principal + Simple Interest
26620 = 20000 + Compound Interest
Compound Interest = 26620 - 20000
= Rs. 6620