Question 57

A man lends some money to his friend at 5% per annum of interest rate. After 2 years, the difference between the Simple and the compound interest on money is Rs. 50. What will be the value of the amount at the end of 3 years if compounded annually?

Solution

If P is the principal and r is the rate of interest, then the difference between simple interest and compound interest for 2  years = $$\ \frac{\ \Pr^2}{100^2}$$

It is given that the difference is Rs 50 and the rate of interest is 5%  per annum.

Principle P = Rs. 20000

Amount at the end of 3 years = $$P\left(1+\ \frac{\ 5}{100}\right)^3$$

= $$20000\left(1+\ \frac{\ 5}{100}\right)^3$$

= Rs.23152.5

D is the correct answer.


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