There is 60% increase in an amount in 6 years at simple interest

There is 60% increase in an amount in 6 years at simple interest. What will be the compound interest on Rs. 12,000 after 3 years at the same rate of interest?

  1. Rs. 6,240
  2. Rs. 2,160
  3. Rs. 3,972
  4. Rs. 3,120

Answer

Let amount be Rs. P and rate of interest be R per annum. Then, according to question, we have,

 P × (1 + 6R) = P + (0.6×P)

(since in 6 years the amount increases by 60 % i.e. 0.6 times)

P × (1 + 6R) = P × (1 + 0.6)

1 + 6R = 1.6

6R = 0.6

R = 0.1 or 10%.

Now, 12,000 accumulates to 12000×(1 + 0.1)3 in 3 years.

So, compound interest is,

12000×(1 + 0.1)3 - 12000 

= 15972 - 12000

= 3972

The correct option is C.