CMA Foundation · Fundamentals of Business Mathematics and Statistics · Time Value of Money and Annuity - Simple and Compound Interest
A sum invested at 10% per annum compounded annually grows to Rs 13,310 after 3 years. A second investor deposits the same original sum for 3 years at 10% simple interest. How much more does the first investor have than the second at the end of 3 years?
The first investor has Rs 310 more. The original sum is 13,310 divided by 1.331, which is Rs 10,000. Simple interest at 10% for three years gives Rs 13,000, so the difference from Rs 13,310 is Rs 310.
- ARs 310Correct
- BRs 1,000
- CRs 331
- DRs 1,310
Explanation
Principal P x 1.331 = 13,310, so P = Rs 10,000. Simple interest amount = 10,000 + 3,000 = Rs 13,000. Difference = 13,310 - 13,000 = Rs 310. Rs 1,310 would result from comparing with the principal only less 2,000 of interest, an error in the base.
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