CMA Foundation · Fundamentals of Business Mathematics and Statistics · Time Value of Money and Annuity - Simple and Compound Interest
A sum of money lent at simple interest amounts to Rs 13,600 in 3 years and to Rs 15,200 in 5 years. What is the principal?
The principal is Rs 11,200. The difference between the two amounts, Rs 1,600, is interest for 2 years, so yearly interest is Rs 800. Three years of interest is Rs 2,400, and subtracting it from Rs 13,600 leaves Rs 11,200.
- ARs 10,000
- BRs 11,200Correct
- CRs 12,000
- DRs 12,800
Explanation
Interest for the extra 2 years = 15,200 - 13,600 = Rs 1,600, so yearly interest is Rs 800. Interest for 3 years = Rs 2,400. Principal = 13,600 - 2,400 = Rs 11,200. Check: 11,200 + 5 x 800 = 15,200. Rs 12,800 results from subtracting only 1 year of interest.
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