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What sum (in тВ╣) will earn an interest of тВ╣720 in 3 years at 8% simple interest per year?
2500
3000
4000
3500
3000
Calculate total effective interest percentage for the period as 3├Ч8%=24%. Then, 24% of Principal = 720, so 1%=30 and 100%=3000.
Simple Interest (SI) = 720, Time (T) = 3 years, Rate (R) = 8% per annum
SI=100P├ЧR├ЧTтАЛ
Calculate total effective interest percentage for the period as 3├Ч8%=24%. Then, 24% of Principal = 720, so 1%=30 and 100%=3000.
Confusing Simple Interest with Compound Interest, leading to the use of the formula A=P(1+r/100)n instead of the linear SI formula.
Identify Given Parameters
We are given the simple interest SI=720, the rate R=8%, and time T=3 years.
SI=720,R=8,T=3
Rearrange Formula for Principal
To find the principal P, we rearrange the simple interest formula SI=100P├ЧR├ЧTтАЛ to P=R├ЧTSI├Ч100тАЛ.
P=8├Ч3720├Ч100тАЛ
Perform Calculation
First multiply 8├Ч3=24. Then divide the numerator 72000 by 24 to get the final result.
P=2472000тАЛ=3000
B is correct because the principal amount calculated using the simple interest formula is 3000.
This concept of 'effective rate' (R├ЧT) is a powerful tool to quickly solve problems in Profit and Loss, as well as Installment-based questions in Banking exams.