Question: Compound interest on a certain sum at the rate of 25% per annum after 2 years is Tk. 5,625. Find the simple interest on that sum at the rate of 12% per annum for 5 years.
Solution:
Let the sum be, P = x.
Rate of interest, r = 25%
Period, n = 2 years
We know,
Compound Principal, C = P(1 + r)n
∴ Compound interest = P(1 + r)n - P
Hence, compound interest = x(1 + 25/100)2 - x = 5,625
⇒ x(5/4)2 - x = 5,625
⇒ x(25/16) - x = 5,625
⇒ x(9/16) = 5,625
⇒ x = (5,625 × 16)/9
∴ x = 10,000 Tk.
Again,
Principal, P = 10,000 Tk.
Rate of interest, r = 12%
Period, n = 5 years
We know,
Simple Interest, I = Pnr/100
Hence, simple interest = 10,000 × 5 × 12/100
= 6,000 Tk.