A bank pays simple interest at 4% per annum for the first 2 years, 5% per annum for the next 3 years and 7% per annum for any period beyond 5 years. What simple interest is earned on Rs 6400 invested for 8 years?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 2816
Simple interest for each period is worked out separately on the same principal and the parts are added.
First 2 years: \(4\times2=8\%\)
Next 3 years: \(5\times3=15\%\)
Last 3 years: \(7\times3=21\%\)
Total \(=44\%\) of Rs 6400 \(=2816\)
The simple interest is Rs 2816.
Why the other options are incorrect
Option (1) Rs 1472 — Incorrect. This leaves out the last 3 years at 7%.
Option (2) Rs 2560 — Incorrect. This uses 5% for all 8 years.
Option (3) Rs 3584 — Incorrect. This uses 7% for all 8 years.