Multiple choice

A man gets a simple interest of Rs. 1,000 on a certain principal at the rate of 5% p. a. in 4 years. What compound interest will the man get on twice the principal in two years at the same rate?

  1. Rs. 1,050

  2. Rs. 1,005

  3. Rs. 11,025

  4. Rs. 1,025
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

SI = (P * R * T) / 100 => 1000 = (P * 5 * 4) / 100 => 1000 = P * 0.2 => P = 5000. New Principal = 2 * 5000 = 10000. Compound Interest for 2 years at 5% = 10000 * (1.05^2 - 1) = 10000 * (1.1025 - 1) = 10000 * 0.1025 = 1025.

AI explanation

Using the simple interest formula Principal = (SI * 100) / (R * T), the principal is calculated as (1000 * 100) / (5 * 4), which equals Rs. 5000. Twice this principal is Rs. 10000. Applying the compound interest formula for two years, CI = P * [(1 + R/100)^2 - 1], we get 10000 * [(1 + 5/100)^2 - 1]. This evaluates to 10000 * 0.1025, resulting in a compound interest of Rs. 1025.

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