Q. If the simple interest on a sum of money at 5% per annum for 3 years is Rs. 1,200, find the compound interest on the same sum for the same period at the same rate.
a) Rs. 1,261
b) Rs. 1,690
c) Rs. 1,400
d) Rs. 1,575
Correct Answer: a) Rs. 1,261
Question from UPPSC Prelims CSAT 2025
Explanation:
Simple interest: SI = P*r*t/100 = 1200 with r = 5% and t = 3, so P = 1200*100/(5*3) = 8000.
Compound interest for 3 years at 5%: CI = P[(1 + 0.05)^3 – 1] = 8000[(1.157625) – 1] = 8000*0.157625 = 1261.
Alternatively, CI – SI for 3 years = P[3(r/100)^2 + (r/100)^3] = 8000[3*0.0025 + 0.000125] = 61; hence CI = 1200 + 61 = 1261.
