Compound Interest on Loan at “2.5 paise per rupee per annum” — 3-year horizon: Vijay obtains a loan of ₹ 64000. The rate is 2.5 paise per rupee per annum (i.e., 2.5% p.a.) compounded yearly. Find the compound interest payable after 3 years.

Introduction / Context:
Rates sometimes appear as “paise per rupee per annum.” Since 100 paise = 1 rupee, 2.5 paise per rupee equals 2.5/100 = 0.025 = 2.5% per annum. Use standard compound interest with annual compounding to compute the total interest for the given horizon.

Given Data / Assumptions:

• Principal P = ₹ 64000
• Annual rate r = 2.5% = 0.025
• Time t = 3 years; annual compounding

Concept / Approach:
Amount after 3 years: A = P(1 + r)^3. The compound interest (CI) equals A − P = P[(1 + r)^3 − 1]. Plug in r = 0.025 and compute the factor precisely.

Step-by-Step Solution:

Verification / Alternative check:

Why Other Options Are Wrong:

• ₹ 4920 is rounding-down; ₹ 5020, ₹ 4821, ₹ 5000 do not match exact compounding.

Common Pitfalls:

• Interpreting 2.5 paise per rupee as 2.5% points incorrectly.

Final Answer:
Rs. 4921.