Shortcut Trick
Difference in effective interest rate for 1 year = (5 × 5) / 100 = 0.25%.
0.25% of Sum = Rs. 88.80 ⇒ 100% of Sum (Principal) = 88.80 × 400 = Rs. 35,520.
Simple Interest for 12/3 (or 5/3) years = (35,520 × 10 × 5/3) / 100.
Required SI = 35,520 ÷ 6 = Rs. 5,920.
∴ The correct answer is Rs. 5,920.
Alternate Method
Given: Rate (R) = 10% p.a., Time (T) = 1 year, Difference in CI = Rs. 88.80.
Formula Used: CI = P[(1 + r/n)nt − 1]; SI = (P × R × T) / 100.
⇒ Case 1 (Yearly): CI1 = P × 10% = 0.10P
⇒ Case 2 (Half-yearly): Rate = 5%, Periods = 2; CI2 = P[(1 + 0.05)2 − 1] = 0.1025P
⇒ Difference = 0.1025P − 0.10P = 0.0025P
⇒ 0.0025P = 88.80 ⇒ P = 88.80 / 0.0025 = 35,520
⇒ For SI: T = 5/3 years, R = 10%
⇒ SI = (35,520 × 10 × 5/3) ÷ 100 = 35,520 × 50 ÷ 300
⇒ SI = 35,520 ÷ 6 = 5,920
∴ The correct answer is Rs. 5,920.
Additional Information
Half-Yearly Compounding
When interest is compounded half-yearly, the annual rate is divided by 2 (R' = R/2) and the time is multiplied by 2 (n = 2T).
Difference for Two Periods
The difference between CI and SI for two periods is given by P × (R/100)2, where R is the rate per period.
Effective Rate Method
For two successive changes of a% and b%, the effective change is (a + b + ab/100)%. This is useful for Compound Interest calculations.