Multiple choice

If the difference between the compound interest (compounded annually) and the simple interest accrued in one and a half years at 8% per annum is Rs.80. What is the simple interest in three years on the same amount and at the same rate of interest?

  1. Rs.6000

  2. Rs.7200

  3. Rs.5600

  4. Rs.4800

  5. None of these
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A Correct answer
Explanation

For the difference between CI and SI in 1.5 years at 8%: CI - SI = P[(1.08)^1.5 - 1] - P(0.08)(1.5) = P(1.1232 - 1) - 0.12P = 0.1232P - 0.12P = 0.0032P = 80, so P = 25000. Simple interest for 3 years = 25000 × 0.08 × 3 = 6000.

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