Shortcut Trick
For the first 2 years, the effective Compound Interest rate is 10 + 10 + (10 × 10)/100 = 21%.
For the fractional 1/3 year, the rate is 10 × 1/3 = 10/3%.
Total effective rate = 21 + 10/3 + (21 × 10/3)/100 = 21 + 3.333 + 0.7 = 25.033...% (or exactly 751/30%).
Sum (P) = (CI × 100) / Effective Rate = (1201.60 × 3000) / 751 = Rs. 4,800.
∴ The correct answer is Rs. 4,800.
Alternate Method
Given: Rate (R) = 10%, Time (T) = 2 1/3 years, Compound Interest (CI) = Rs. 1,201.60.
Formula Used: Amount (A) = P(1 + R/100)n × [1 + (Fractional Time × R)/100]
⇒ Amount (A) = P(1 + 10/100)2 × [1 + (1/3 × 10)/100]
⇒ A = P × (1.1)2 × (1 + 1/30)
⇒ A = P × 1.21 × (31/30)
⇒ A = P × (121/100) × (31/30) = P × (3751/3000)
⇒ CI = A − P = P(3751/3000 − 1) = P(751/3000)
⇒ 1201.60 = 751P / 3000
⇒ P = (1201.60 × 3000) / 751
⇒ P = 1.6 × 3000 = 4800
∴ The correct answer is Rs. 4,800.
Additional Information
Effective Rate of CI
For two successive rates x% and y%, the combined rate is x + y + (xy/100)%.
CI for Fractional Years
When time is T = n + a/b years, Amount = P(1 + R/100)n[1 + (a/b × R)/100].
Difference between CI and SI
For 2 years, CI − SI = PR2 / 1002. For 3 years, CI − SI = [PR2(300 + R)] / 1003.