Multiple choice

The compound interest on a certain sum for 2 years is Rs. 648 and the simple interest is Rs. 600. Find the annual rate of interest.

  1. 10%

  2. 12%

  3. 14%

  4. 16%

  5. 20%
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D Correct answer
Explanation

Simple Interest (SI) for 2 years = 600, so SI for 1 year = 300. Compound Interest (CI) for 2 years = 648. The extra 48 is the interest on the first year's interest (300). Rate = (48/300) * 100 = 16%.

AI explanation

The difference between compound interest and simple interest for two years is calculated as P times R squared divided by 10000. The difference is 648 minus 600, which equals Rs. 48. The simple interest for one year is 600 divided by 2, which equals Rs. 300, so the principal is P. Thus, 48 equals 300 times R divided by 100, meaning 48 equals 3R. Solving for R gives 16 percent.

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