The simple interest on a sum of ₹ 1,000 for 2 years at 5% p.a. is invested at compound interest for 4 years at the same interest rate. What is the compound interest on the simple interest?

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RRB ALP Electrician 22 Jan 2019 Official Paper (Shift 3)
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  1. ₹ 121.55
  2. ₹ 25
  3. ₹ 125
  4. ₹ 21.55

Answer (Detailed Solution Below)

Option 4 : ₹ 21.55
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Detailed Solution

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Given:

Sum = Rs. 1000

Rate = 5%

Time = 2 years

Concept:/Formula:

SI = P × r × t/100

A = P (1 + r/100)t

P = Principal, r = rate and t = time

Calculation:

SI = (1000 × 2 × 5)/100

⇒ SI = 100

According to the question,

A = 100 (1 + 5/100)4

⇒ A = 100 × 21/20 × 21/20 × 21/20 × 21/20

⇒ A = 121.55

⇒ CI = 121.55 – 100 = 21.55

∴ required compound interest = Rs. 21.55

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