If the compound interest on a certain sum at 16 per annum for 3 years is ₹1270, find the simple interest on the same sum at the same rate and for the same period.
- AOption (a)
₹1080
- BOption (b)
₹1000
- COption (c)
₹1500
- DOption (d)
₹2000
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Correct answer
₹1080
Why this answer is correct
Shortcut Trick
Rate = 16 2/3% = 1/6.
Let Principal = 63 = 216 units.
Amount after 3 years = 73 = 343 units ⇒ CI = 343 − 216 = 127 units.
Given CI = ₹1270 ⇒ 127 units = 1270 ⇒ 1 unit = ₹10.
SI for 3 years = 216 × (1/6) × 3 = 108 units = 108 × 10 = ₹1080.
∴ The correct answer is ₹1080.
Alternate Method
Given:
Rate (R) = 16 2/3% = 50/3% per annum
Time (T) = 3 years
Compound Interest (CI) = ₹1270
Formula Used:
Amount (A) = P × (1 + R/100)T
CI = A − P
SI = (P × R × T) ÷ 100
Principal = ₹2160
Year 1 SI = ₹360
Year 2 SI = ₹360
Year 3 SI = ₹360
Total SI = ₹1080
Calculations:
⇒ Let the Principal be P.
⇒ Amount (A) = P × (1 + 1/6)3
⇒ A = P × (7/6)3 = P × (343/216)
⇒ CI = A − P = P × (343/216) − P = P × (127/216)
⇒ P × (127/216) = 1270
⇒ P = 1270 × (216/127) = 10 × 216 = 2160
⇒ Now, Simple Interest (SI) = (P × R × T) ÷ 100
⇒ SI = (2160 × 50/3 × 3) ÷ 100
⇒ SI = (2160 × 50) ÷ 100 = 1080
∴ The correct answer is ₹1080.
Additional Information
Difference between CI and SI for 2 years
The difference between compound interest and simple interest for 2 years on a certain sum is directly calculated by: D = P(R/100)2.
Difference between CI and SI for 3 years
For a 3-year period, the difference formula extends to: D = P(R/100)2 × (3 + R/100).
Multiplying Factor Method
When the rate of interest fraction is 1/x, the principal is usually assumed as x3 for 3 years to simplify compound interest calculations and avoid decimals.