Multiple choice

A sum was invested in a bank at 12.5 rate of interest. If compound interest for the third year was Rs. 9720. Find the total interest of first two years.

  1. Rs. 15480

  2. Rs. 16320

  3. Rs. 13920

  4. Rs. 11620

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Let principal be P. At 12.5% rate, Amount after 2 years = P(1.125)² and after 3 years = P(1.125)³. CI for 3rd year = P(1.125)³ - P(1.125)² = P(1.125)²(0.125) = 9720. So P(1.125)² = 9720/0.125 = 77760. Interest for first 2 years = P(1.125)² - P = 77760 - 69120 = 16320.

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