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If the C.I. on a sum for 2 years at 12 1/2 % per annum is Rs. 510, the S.I. on the same sum at the same rate for the same period of time is________?

Correct answer: D. Rs. 480

  • A. Rs. 400
  • B. Rs. 450
  • C. Rs. 460
  • D. Rs. 480

Explanation

At 12.5% for 2 years, compound interest is P[(1.125)^2 - 1] = 0.265625P = Rs. 510, giving P = Rs. 1920. Simple interest for the same period is Rs. 1920 x 12.5 x 2 / 100 = Rs. 480. The likely mistake is choosing option c, Rs. 460, because compound interest is incorrectly treated as only slightly different from simple interest without calculating the principal.

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