The interest earned when a sum invested at 32% p.a. simple interest for 5 years is Rs. 2400. The same initial sum when invested at (R + 12)% p.a. compound interest, compounded annually amounts to Rs. 2535 at the end of two years. Find the value of R.
- AOption (a)
18
- BOption (b)
22
- COption (c)
26
- DOption (d)
15
- EOption (e)
32
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Correct answer
18
Why this answer is correct
Shortcut Trick
Total SI% for 5 years = 32% × 5 = 160%
Principal (P) = 2400 ÷ 160% = ₹1500
For Compound Interest: Amount ÷ Principal = 2535 ÷ 1500 = 1.69
Rate factor for 2 years = √1.69 = 1.3 → Rate = 30%
R + 12 = 30 ⇒ R = 18
∴ The correct answer is 18.
Alternate Method
Given: SI = ₹2400, RateSI = 32%, TimeSI = 5 years, AmountCI = ₹2535, TimeCI = 2 years.
Formula Used: SI = (P × R × T) ÷ 100; A = P(1 + r/100)n
⇒ 2400 = (P × 32 × 5) ÷ 100
⇒ 2400 = 1.6P ⇒ Principal (P) = 1500
⇒ 2535 = 1500(1 + (R + 12)/100)2
⇒ 2535 ÷ 1500 = (1 + (R + 12)/100)2
⇒ 1.69 = (1 + (R + 12)/100)2
⇒ 1.3 = 1 + (R + 12)/100
⇒ 0.3 = (R + 12) ÷ 100 ⇒ R + 12 = 30 ⇒ R = 18
∴ The correct answer is 18.
Additional Information
Simple Interest vs Compound Interest
SI is calculated only on the principal, whereas CI is calculated on the principal plus the accumulated interest of previous periods.
Effective Rate of CI for 2 Years
For a rate r%, the effective CI rate for 2 years is (2r + r2/100)%.
Square Root Method for CI
If the time is 2 years, the ratio √(Amount/Principal) gives the multiplying factor (1 + r/100) for one year.