Question : A person deposited INR 15,600 in a fixed deposit at 10% per annum simple interest. After every second year, he adds his interest earned to the principal. The interest at the end of 4 years is:
Option 1: INR 6,655
Option 2: INR 6,864
Option 3: INR 3,975
Option 4: INR 3,744
Correct Answer: INR 6,864
Solution :
Simple interest = $\frac{(P \times T \times R)}{100}$
Here,
$P$ = Principal
$T$ = Time
$R$ = Rate
Interest after 2 years = $\frac{15600\times 10\times 2}{100} = 3120$
New principal after 2 years = 15600 + 3120 = INR 18,720
Now, the interest after next 2 years = $\frac{18720\times 10\times 2}{100} =3744$
So, the total interest after 4 years = 3120 + 3744 = INR 6,864
Hence, the correct answer is INR 6,864.
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