Multiple choice

The simple interest on a sum of money for 2 years is Rs. 100 and the compound interest on the same sum at the same rate for the same time is Rs. 104. Find the rate of interest.

  1. 2% p.a.

  2. 4% p.a.

  3. 6% p.a.

  4. 8% p.a.
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D Correct answer
Explanation

SI for 2 years = 100, so SI for 1 year = 50. CI for 2 years = 104. The extra 4 is the interest on the first year's interest (50). Rate = (4/50) * 100 = 8%.

AI explanation

For two years, the difference between compound interest and simple interest is Rs. 4, which represents the interest earned on the first year's simple interest. The simple interest for one year is Rs. 50, so the rate of interest is 4 divided by 50 multiplied by 100, which equals 8 percent per annum.

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