The difference between the compound interest, compounded annually and simple interest on Rs. ‘P’ at the rate of 20% p.a. for 2 years, is Rs. 120. If Rs. (P + 1500) is invested at the same rate p.a., then find the compound interest, compounded annually earned after 3 years.
Using formula Difference = Sum(R/100)2 Or, 120 = P(20/100)2 Or, 120 = P(400/10000) Or, 0.0400P = 120 Or, P = 3000 Sum that is invested on compound interest = 3000 + 1500 = Rs. 4500 Compound interest = 4500(1 + 20/100)3 – 4500 = 4500 × (6/5) × (6/5) × 6/5) – 4500 = 7776 – 4500 = Rs. 3276
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