AFCAT Model Paper 1

Given:
The difference between compound interest and simple interest on an amount lent for 2 years at the rate of 7% is Rs. 490.
Formula Used:
Difference between SI and CI for 2 years at rate of interest r is

Pr2

100

C I = Amount – Principal =P(1+

r

100

)n–P
SI=

(P×r×t)

100

,
Where P is amount, r is rate of interest and t is time period.
Calculation:
Let the sum be P
The difference between compound interest and simple interest on a sum of money lent for 2 years at 7% is 490.
⇒ CI – SI = 490
⇒ P×{(1+

7

100

)2−1}−

(P×7×2)

100

=490
⇒ P×[

49

(100×100)

]=490
⇒ P = 100000
The interest if that amount is again invested for 1 year under compound interest at the rate of 11 % = Rs. (100000×

11

100

)= Rs. 11000
∴ The interest is Rs. 11000