The rate of simple interest is 5% per annum for the first 3 years, 6% per annum for the next 4 years and 7% per annum for the period beyond 7 years. If a man invests Rs 8700 for 11 years, what simple interest does he earn?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 5829
Simple interest is always worked out on the original sum, so the interest rates of the separate periods can be added year by year.
First 3 years: \(3\times5\%=15\%\)
Next 4 years: \(4\times6\%=24\%\)
Remaining \(11-7=4\) years: \(4\times7\%=28\%\)
Total interest \(=15\%+24\%+28\%=67\%\) of the sum
\(67\%\times8700=5829\)
He earns a simple interest of Rs 5829.