Multiple choice

The simple interest accrued on a sum of certain principal in 8 yr. at the rate of 13% per year is 6500. What would be the compound interest accrued on that principal at the rate of 8% per year in 2 yr.?

  1. 1040

  2. 1020

  3. 1060

  4. 1200

  5. None of these
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A Correct answer
Explanation

From SI formula, P = (6500 × 100)/(13 × 8) = 6250. CI for 2 years at 8% = 6250 × [(1.08)² - 1] = 6250 × 0.1664 = 1040. The key is finding principal from the simple interest information first.

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