Multiple choice

The simple interest accured on an amount of Rs. 25,000 at the end of three years is Rs. 7,500 .What would be the compound interest accured on the same amount at the same rate in the same period?

  1. Rs. 7,750

  2. Rs. 8500

  3. Rs. 8275

  4. Rs. 8250

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Simple Interest (SI) for 3 years on Rs. 25,000 is Rs. 7,500. Rate = (SI × 100) / (P × T) = (7500 × 100) / (25000 × 3) = 750000 / 75000 = 10% per annum. For Compound Interest (CI), Amount = P(1 + r/100)³ = 25000(1 + 10/100)³ = 25000(1.1)³ = 25000 × 1.331 = Rs. 33,275. CI = Amount - Principal = 33275 - 25000 = Rs. 8,275. The difference between CI and SI occurs because CI earns interest on accumulated interest, while SI is only on principal. Option A (Rs. 7,750) is close but incorrect. Option B (Rs. 8,500) and D (Rs. 8,250) don't match the calculation.