Multiple choice

Direction : Study the following questions carefully and choose the right answer. Saahil invested one half of his savings in a Life Insurance Policy that paid simple interest for 2 years and received Rs. 550 as interest. He invested the remaining in another Life Insurance Policy that paid compound interest, interest being compounded annually, for 2 years at the same rate of interest and received Rs. 605 as interest. What was the value of his total savings before investing in these two policies?

  1. Rs. 3,050

  2. Rs. 3,250

  3. Rs. 2,680

  4. Rs. 2,750

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

Let S be the total savings. Half (S/2) earns simple interest: (S/2 * r * 2) / 100 = 550, so Sr = 55000. The other half earns compound interest: (S/2) * ((1 + r/100)^2 - 1) = 605. Substituting Sr = 55000, we solve for r and then S.

AI explanation

Since both policies have the same principal, the extra interest of Rs. 55 earned in the second policy comes solely from the interest generated in the second year by the first year's interest. This makes the annual interest rate 55 divided by 275, which equals 20 percent. Using this 20 percent rate in the simple interest formula for the first policy, the principal invested in it is 550 multiplied by 100 and divided by the product of 20 and 2, yielding Rs. 1375. Since this Rs. 1375 represents half of his total savings, his total savings before investing was Rs. 2750.

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