The amount received at 10% per annum compound interest after 3 yrs is Rs. 10,648. What was the principal (in Rs.)?
- AOption (a)
8000
- BOption (b)
9000
- COption (c)
8500
- DOption (d)
7500
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Correct answer
8000
Why this answer is correct
Shortcut Trick
Rate of interest = 10% = 1/10.
For Compound Interest, the ratio of Principal (P) to Amount (A) for 1 year is 10 : 11.
For 3 years, the ratio P : A = 103 : 113 = 1000 : 1331.
Given Amount = 1331 units = ₹10,648.
1 unit = 10,648 ÷ 1331 = 8.
Principal = 1000 units = 1000 × 8 = ₹8000.
∴ The correct answer is ₹8000.
Alternate Method
Given:
Amount (A) = ₹10,648
Rate (R) = 10% per annum
Time (n) = 3 years
Formula Used:
A = P(1 + R/100)n
Calculations:
⇒ 10,648 = P(1 + 10/100)3
⇒ 10,648 = P(1 + 1/10)3
⇒ 10,648 = P(11/10)3
⇒ 10,648 = P × (1331 / 1000)
⇒ P = (10,648 × 1000) / 1331
⇒ P = 8 × 1000
⇒ P = ₹8000
∴ The correct answer is ₹8000.
Additional Information
Effective Rate of Interest
For a rate R, the effective CI rate for 3 years is [ (1 + R/100)3 − 1 ] × 100%. For 10%, it is 33.1%.
Difference between CI and SI
For 3 years: Difference = P(R/100)2 × (3 + R/100). For 2 years: Difference = P(R/100)2.
Half-Yearly Compounding
When interest is compounded half-yearly, the rate is halved (R/2) and the time period is doubled (2n).