Multiple choice

At the rate of 5% annual interest on a sum of money, Rs. 1,261 compound interest is received in 3 years. The sum of money invested is:

  1. Rs. 9,000

  2. Rs. 8,400

  3. Rs. 8,000

  4. Rs. 7,500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Compound interest formula: A = P(1 + r/100)^n. CI = P((1 + 0.05)^3 - 1) = P(1.157625 - 1) = 0.157625P. Setting 0.157625P = 1261, P = 1261 / 0.157625 = 8000.

AI explanation

Using the compound interest formula where Amount equals Principal multiplied by the quantity 1 plus Rate divided by 100 raised to the power of Time, the amount is P plus 1261. So, P plus 1261 equals P multiplied by 1.05 cubed, which is 1.157625P. Subtracting P from both sides gives 0.157625P = 1261, and dividing yields a principal of Rs. 8,000.

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