Question

Shikha deposited Rs. 2000 in a bank which pays 6% simple interest. She withdrew Rs. 700 at the end of first year. What will be her balance after 3 years?

Answer 1

Hint: We first explain the formulas for simple and compound interest. We assume the values for the interest rate and the principal. We put the values and find the equations for two unknowns. We solve them to find the solutions.

Complete step by step solution:
First, we will explain the formulas for compound interest and simple interest.
Let the principal be P, interest rate be r and time period be n, then for the compound interest the formula will be $ A=P{{\left( 1+\dfrac{r}{100} \right)}^{n}}-P $ and simple interest will be $ A=\dfrac{Pnr}{100} $ .
Shikha deposited Rs. 2000 in a bank which pays 6% simple interest. She withdrew Rs. 700 at the end of first year.
At the end of the first year the total amount will be
 $ P+\dfrac{Pnr}{100}=2000\left( 1+\dfrac{6}{100} \right)=2120 $ .
After withdrawing 700 the remaining amount is $ 2120-700=1420 $ Rs.
We need to find her balance after 3 years. So, the amount 1420 remains for 2 more years.
So, the final amount will be $ 1420\left( 1+\dfrac{6\times 2}{100} \right)=1590.4 $ Rs.
So, the correct answer is “Rs.1590.4”.

Note: We also can use the substitution process where we replace the values for one variable in the second equation. The addition of the interest with the principal value is the total payback. So, the formula becomes $ P{{\left( 1+\dfrac{r}{100} \right)}^{n}} $ and $ P+\dfrac{Pnr}{100} $ .