Question

The simple interest and compounded interest (compounded annually) earned on a certain sum of money are 8,000 and 8,400 respectively. If the principal is 40,000 and the rate of interest is 10% per annum, then what is the duration of the investment?

• A. 1 year
• B. 1.5 year
• C. 2 year
• D. 2.5 year

Answer 1

The Correct Option is C

Step 1: Use the Simple Interest Formula

The formula for simple interest (SI) is: 

\[ SI = \frac{P \times R \times T}{100} \]

Step 2: Substitute the Given Values

Given:

• Principal (P) = 40,000
• Rate of Interest (R) = 10%
• Simple Interest (SI) = 8,000

Substituting these values into the formula:

\[ 8000 = \frac{40000 \times 10 \times T}{100} \]

Step 3: Solve for T

Rearranging the equation:

\[ 8000 = 4000T \]

\[ T = \frac{8000}{4000} = 2 \]

Final Conclusion:

The duration of the investment is 2 years.