There is a 60% increase in an amount in 5 years at simple interest. What will be the compound interest on ₹ 6,250 for two years at the same rate of interest, when the interest is compounded yearly?
Answer & explanation
Correct answer: option 1
Simple interest of 5 years = 60%
Simple interest of 1 year = 12%
Now ,
Amount = Principal × ( 1 + \(\frac{rate }{100}\) )t
= 6250× ( 1 + \(\frac{12 }{100}\) )2
= 6250 × \(\frac{28 }{25}\) × \(\frac{28 }{25}\)
= 7840
We know ,
Amount = Principal + Interest
7840 = 6250 + Interest
Interest = 7840 - 6250 = Rs. 1590