Question

A sum invested at 16% p.a. simple interest earns Rs. 736 as interest. If the same sum were kept for 8 more years, the interest would be Rs. 3680. What amount is obtained if the same sum is invested at 9% p.a. compounded annually for 2 years?

• A. Rs. 2732.63
• B. Rs. 2720.75
• C. Rs. 2714.00
• D. Rs. 2845.26

Hint:

Work out the simple interest earned in a single year first, then use that to find the principal before compounding it year by year.

Answer 1

The Correct Option is A

Extra 8 years give extra interest \(3680-736=2944\), so \(\frac{P\times 16\times 8}{100}=2944\Rightarrow P=\frac{2944\times 100}{128}=2300\). (Check original time: \(\frac{2300\times 16\times t}{100}=736\Rightarrow t=2\).) At 9% compounded annually for 2 years: \(A=2300(1.09)^2=2300\times 1.1881=2732.63\). Correct option: Rs. 2732.63.