All Exams Test series for 1 year @ ₹349 only
Question

A bank pays interest to its depositors compounded yearly. If a deposit becomes Rs. 54,000/- at the end of 3 rd year and Rs. 64,800/- at the end of 6 th  year, what is the principal invested in the deposit?

The correct answer is

45,000

Principal Invested Calculation with Compound Interest

This problem involves calculating the initial principal amount deposited in a bank account where interest is compounded yearly. We are given the amount accumulated after 3 years and after 6 years.

Let the principal amount be \( P \). Let the annual interest rate be \( r \). The formula for compound interest is:

\( A = P(1 + r)^n \)

where \( A \) is the amount after \( n \) years.

Using Given Information to Formulate Equations

We are given the following information:

  • Amount at the end of the 3rd year, \( A_3 = 54000 \)
  • Amount at the end of the 6th year, \( A_6 = 64800 \)

Using the compound interest formula, we can write these as:

  • Equation 1: \( 54000 = P(1 + r)^3 \)
  • Equation 2: \( 64800 = P(1 + r)^6 \)

Finding the Compound Factor over the Period

Notice that the period between the 3rd year and the 6th year is \( 6 - 3 = 3 \) years. The amount at the end of the 6th year is the amount at the end of the 3rd year compounded for another 3 years.

We can also see this by dividing Equation 2 by Equation 1:

\( \frac{A_6}{A_3} = \frac{P(1 + r)^6}{P(1 + r)^3} \)

\( \frac{64800}{54000} = (1 + r)^{6-3} \)

\( \frac{64800}{54000} = (1 + r)^3 \)

Calculating the Growth Factor

Now, let's calculate the value of \( (1 + r)^3 \):

\( (1 + r)^3 = \frac{64800}{54000} \)

We can simplify the fraction by dividing both the numerator and denominator by 100:

\( (1 + r)^3 = \frac{648}{540} \)

Both 648 and 540 are divisible by common factors. Let's divide by 108 (since \( 6 \times 108 = 648 \) and \( 5 \times 108 = 540 \)):

\( (1 + r)^3 = \frac{648 \div 108}{540 \div 108} = \frac{6}{5} \)

So, \( (1 + r)^3 = 1.2 \).

Determining the Principal Amount

We can substitute this value of \( (1 + r)^3 \) back into Equation 1:

\( 54000 = P(1 + r)^3 \)

\( 54000 = P \times 1.2 \)

To find the principal \( P \), we rearrange the equation:

\( P = \frac{54000}{1.2} \)

To divide by 1.2, we can write 1.2 as \( \frac{12}{10} \) or multiply the numerator and denominator by 10:

\( P = \frac{54000 \times 10}{1.2 \times 10} = \frac{540000}{12} \)

Now, perform the division:

\( P = 45000 \)

Therefore, the principal amount invested in the deposit was Rs. 45,000.

Was this answer helpful?

Important Questions from Miscellaneous

  1. List-I with List-II:
    List-I
    (Relief Materials)
    List-II
    (Color Code)
    A. ShelterI. Yellow
    B. ClothesII. Khaki
    C. FoodIII. Red
    D. MedicineIV. Brown

    Choose the correct answer from the options given below:
  2. What was a key reform introduced by the Waqf (Amendment) Act, 2025?
  3. Which of the following is NOT a state function or state variable in a thermodynamic system?

  4. What is the full form for "BPL" in Socio-economic aspects?
  5. In October 2024, which of the following companies was awarded the contract for design, manufacturing and commissioning of two high-speed trainsets by Integral Coach Factory (ICF) to be used in India's first bullet train between Mumbai and Ahmedabad?
Need Expert Advice?

Start Your Preparation with Prepp Mobile App

Download the app from Google Play & App Store
Download the app from Google Play & App Store
Prepp Mobile App