Multiple choice

The compound interest on an amount of money for 2 years at certain rate of interest is Rs. 2020 and simple interest on the same amount over same time period and rate of interest is Rs. 2000. What is CI for same amount in 3 years?

  1. Rs. 3060.40

  2. Rs. 3061.40

  3. Rs. 3062.40

  4. Rs. 3063.40

  5. Rs. 3064.40
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A Correct answer
Explanation

For 2 years, SI = 2000, so SI per year = 1000. CI = 2020, so the extra 20 is the interest on the first year's interest. Rate = (20/1000) * 100 = 2%. Principal P: 1000 = P * 0.02 * 1, so P = 50,000. CI for 3 years = 50000 * ((1.02)^3 - 1) = 50000 * (1.061208 - 1) = 50000 * 0.061208 = 3060.40.

AI explanation

The difference between the compound interest and simple interest for two years is the interest earned on the first year's interest, so the rate of interest is 20 divided by 2000 multiplied by 100, which equals 1 percent. The compound interest for three years is the principal plus three years of simple interest plus the compounded extra from years two and three. Calculate this as 2000 plus 60 plus 20.1 plus 20.3, which results in Rs. 3060.40.

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