Shortcut Trick
Effective Compound Interest rate for 2 years at 12% = 12 + 12 + (12 × 12)/100 = 25.44%
Effective Simple Interest rate for 4 years (double time) at 6% (half rate) = 6 × 4 = 24%
According to the question, 25.44% → ₹ 1,590
∴ 24% → (1590 ÷ 25.44) × 24 = (159000 ÷ 2544) × 24
⇒ (159000 ÷ 106) = ₹ 1,500
∴ The correct answer is ₹ 1,500.
Alternate Method
Given: Compound Interest (CI) = ₹ 1,590, Rate (R1) = 12%, Time (T1) = 2 years.
Formula Used: CI = P[(1 + R/100)T − 1]; SI = (P × R × T) / 100
⇒ 1590 = P[(1 + 12/100)2 − 1]
⇒ 1590 = P[(1.12)2 − 1] = P[1.2544 − 1]
⇒ 1590 = P × 0.2544
⇒ Principal (P) = 1590 ÷ 0.2544 = ₹ 6,250
⇒ For Simple Interest (SI): New Time = 4 years, New Rate = 6%
⇒ SI = (6250 × 6 × 4) ÷ 100
⇒ SI = (6250 × 24) ÷ 100 = 62.5 × 24 = ₹ 1,500
∴ The correct answer is ₹ 1,500.
Additional Information
Effective Rate for Compound Interest (2 Years)
For a rate r% p.a., the effective rate for 2 years is calculated as [r + r + (r2/100)]%.
Difference between CI and SI for 2 Years
The difference is given by the formula: Difference = P(R/100)2.
Simple Interest Characteristic
Simple interest remains constant every year if the principal and rate are unchanged. SI = (P × R × T)/100.