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Asked in a 2000 paper

Simple interest on a certain sum of money for 3 years at 8% per annum is half the compound interest on Rs. 4000 for 2 years at 10% per annum. The sum placed on simple interest is:_______?

Correct answer: C. Rs. 1750

  • A. Rs. 1550
  • B. Rs. 1650
  • C. Rs. 1750
  • D. Rs. 2000

Explanation

The compound interest on 4,000 Rs for 2 years is 4,000 Rs x (1.10)^2 - 4,000 Rs = 840 Rs, and half of this is 420 Rs. Therefore, P x 8% x 3 = 420 Rs, so P = 420 Rs / 0.24 = 1,750 Rs. Students may choose 1,650 Rs by using simple interest for the 4,000 Rs deposit instead of compound interest.

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