If the compound interest on a certain sum of money for 2 ½ years at 5% per annum be Rs. 104.05, what would be the simple interest?
Answers
Answer:
Explanation:
Firstly compound interest = P [( 1+ i) ^n - 1]
Where i means rate of interest ÷100
Then after finding value of principle amount find simple interest which is
P × number of years × rate of interst ÷ 100
Concept:
Simple interest is calculated on the loan or deposit's principal amount. Compound interest, on the other hand, is calculated using the principal amount and the interest that accumulates on it over time.
Simple Interest = Principal x Rate x Time / 100
Compound Interest = P(1+R)^T - P
Given:
- Compound interest 104.05
- Time 2 ½ years
- Rate 5% pa
Find:
Simple Interest
Solution:
CI = P(1+R)^T - P
104.05 = P(1+ 0.05)^5/2-P
104.05 = P(1.05)^5/2 - P
104.05 = 1.130 P - P
104.05 = 0.130 P
P = Rs. 803.84
Simple interest = P x R x T/100
Interest = 803.84 × 5 × 2.5 / 100
Simple interest = Rs. 100.48
Hence, we can conclude that if compound interest on 803.84 for 2.5 years at 5% pa is 104.5 then the simple interest will be 100.48.
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