Question

The simple interest accrued on a sum of certain principal in 8 years at the rate of 13% per year is Rs.6500. What would be the compound interest accrued on that principal at the rate of 8% per year in 2 years?

• A. Rs.1040
• B. Rs.1020
• C. Rs.1060
• D. Rs.1200

Hint:

First recover the principal from the simple interest formula, then apply the compound interest formula.

Answer 1

The Correct Option is A

Step 1: Recover the principal from the simple interest given.
Since $SI = \frac{PTR}{100}$, we get $P = \frac{100 \times SI}{TR} = \frac{100 \times 6500}{8 \times 13} = \frac{650000}{104} = 6250$.

Step 2: Build up the compound interest year by year instead of using the formula directly.
In year 1, interest $= 8\%$ of $6250 = 500$, so the amount grows to $6250+500=6750$. In year 2, interest is charged on this new amount: $8\%$ of $6750 = 540$.

Final Answer:
Total compound interest over the two years $= 500+540 = 1040$. \[ \boxed{1040} \]