Question

When the rate of interest in a nationalized bank is increased from 5% to 6% per annum, a person deposits Rs. 1000 more into his account. If the annual interest now received by him is Rs. 110 more than that before, then his original deposit is:

• A. Rs. 4,000
• B. Rs. 5,000
• C. Rs. 6,000
• D. Rs. 7,000

Hint:

In interest problems, express the interest as a percentage of the principal and use the difference to form an equation to find the original deposit.

Answer 1

The Correct Option is B

Let the original deposit be \( P \). 
Step 1: The annual interest at 5% on the original deposit is: \[ \text{Interest at 5\%} = \frac{5}{100} \times P = 0.05P \] 
Step 2: The new annual interest at 6\% on the new deposit \( P + 1000 \) is: \[ \text{Interest at 6\%} = \frac{6}{100} \times (P + 1000) = 0.06(P + 1000) \] 
Step 3: The difference in interest is Rs. 110, so: \[ 0.06(P + 1000) - 0.05P = 110 \] 
Step 4: Solve for \( P \): \[ 0.06P + 60 - 0.05P = 110 \] \[ 0.01P = 50 \implies P = 5000 \] Thus, the original deposit is Rs. 5,000.