A sum of money invested at simple interest in a bank amounts to Rs.944 in a period of 3 years, while it amounts to Rs.1,136 in a period of 7 years. What is the rate of interest?

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  1. 7%
  2. 6%
  3. 8%
  4. 9%

Answer (Detailed Solution Below)

Option 2 : 6%
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Detailed Solution

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Given:

Amount (A1) after 3 years = ₹944

Amount (A2) after 7 years = ₹1136

Formula Used:

Amount (A) = Principal (P) + Simple Interest (SI)

Simple Interest (SI) = (P × R × T) / 100

Where P is the principal, R is the rate of interest, and T is the time period.

Calculation:

Let the principal be P and the rate of interest be R% per annum.

According to the given information:

P + (P × R × 3) / 100 = 944 (Equation 1)

P + (P × R × 7) / 100 = 1136 (Equation 2)

Subtracting Equation 1 from Equation 2:

[P + (P × R × 7) / 100] - [P + (P × R × 3) / 100] = 1136 - 944

⇒ (7PR / 100) - (3PR / 100) = 192

⇒ 4PR / 100 = 192

⇒ PR / 25 = 192

⇒ PR = 192 × 25

⇒ PR = 4800 (Equation 3)

Substitute the value of PR from Equation 3 into Equation 1:

P + (4800 × 3) / 100 = 944

⇒ P + 144 = 944

⇒ P = 944 - 144

⇒ P = 800

Now substitute the value of P in Equation 3:

800 × R = 4800

⇒ R = 4800 / 800

⇒ R = 6

∴ The rate of interest is 6% per annum.

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