CA Foundation · Quantitative Aptitude · Mathematics of Finance
A sum of money lent at 6% per annum simple interest amounts to ₹6,200 at the end of 4 years. What is the principal?
The principal is ₹5,000. Under simple interest the amount equals P(1 + rt), which here is P × 1.24 for 4 years at 6%. Dividing ₹6,200 by 1.24 gives ₹5,000.
- A₹5,000Correct
- B₹5,849
- C₹4,712
- D₹4,960
Explanation
Amount = P(1 + rt) = P(1 + 0.06 × 4) = 1.24P. So P = 6,200 / 1.24 = ₹5,000. Check: interest = 5,000 × 0.24 = 1,200, and 5,000 + 1,200 = 6,200. The option ₹5,849 comes from dividing by 1.06, which uses only one year of interest.
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