SOLUTION: find the compound interest at 5 percent per annum for 3 years on the principal which gives simple interest of Rs. 2400 at the same rate and for the same time.

Question 1100256: find the compound interest at 5 percent per annum for 3 years on the principal which gives simple interest of Rs. 2400 at the same rate and for the same time.
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
simple interest of 5% per year for 3 years would be equal to 2400.

formula for simple interest is i = p * r * n.

i is the interest
p is the principal
r is the interest rate per time period
n is the number of time periods

formula becomes 2400 = p * .05 * 3

solve for p to get p = 2400 / (.05 * 3) = 16000

i = p * r * n becomes i = 16000 * .05 * 3 which becomes i = 2400

you now know that the principal is 16000.

the compound interest formula is f = p * (1 + r) ^ n

f is the future value
p is the present value
r is the interest rate per time period
n is the number of time periods.

in your problem, this becomes:

f = 16000 * (1 + .05) ^ 3

solve for f to get f = 18522

the interest earned is equal to f - p which is equal to 18522 - 16000 which is equal to 2522.

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