Test Index

Time Value of Money

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Question : 84 of 99

Marks: +1, -0

What principal will amount to Rs. 370 in 6 years at 8\% p.a. at simple interest

Rs.210
Rs.250
Rs.310
Rs.310

Solution:

Concept:

Use simple interest formula: Amount = Principal + (Principal × Rate × Time)/100.

Explanation:

Let Principal be

P

.

Rate

R = 8\%

per annum, Time

T = 6

years.

Amount

A = P \left(1 + \frac{RT}{100}\right) = P \left(1 + \frac{8 \times 6}{100}\right) = P \times 1.48

.

Given

A = 370

, so

P = \frac{370}{1.48} = 250

.

Thus, Principal is Rs. 250.

Answer:

Rs. 250

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