Question

The simple interest on a sum of money for 2 years at 8% per annum is Rs 2400. What will be the compound interest on that sum at the same rate and for the same period?

Answer 1

Simple interest (SI) = Rs. 2400
Rate of interest, R = 8%
Time, t = 2 years
The principal can be calculated using the formula:
Sum = $\frac{100\times SI}{R\times T}$
⇒Sum = Rs. $\frac{100\times 2400}{8\times 2}$
= Rs. 15000
i.e., the principal is Rs. 15000.
The amount including the compound interest is calculated using the formula given below:
A = P $(1+\frac{R}{100}{)}^t$
= Rs.$15000(1+\frac{8}{100}{)}^2$
= Rs.$15000(\frac{100+8}{100}{)}^2$
= Rs. $15000\times (\frac{108}{100}{)}^2$
= Rs.$15000\times 1.08\times 1.08$
= Rs. 17496
i.e., the amount including the compound interest is Rs. 17496
.∴ Compound interest (CI) = Rs. 17496 - 15000=Rs. 2496