Multiple choice

What will be the compound interest on a certain amount for a year payable half-yearly at the same rate of interest if the simple interest on the same amount for 2 years at 6% per annum is Rs. 840?

  1. Rs. 420

  2. Rs. 852.60

  3. Rs. 426.30

  4. Rs. 613.15

  5. Rs. 640
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

SI for 2 years = 840, so SI for 1 year = 420. Rate = 6%. Principal P = (420 * 100) / (6 * 1) = 7000. For compound interest, rate is 6% per annum, so 3% per half-year. For 1 year (2 half-years), CI = 7000 * (1 + 0.03)^2 - 7000 = 7000 * 1.0609 - 7000 = 426.30.

AI explanation

The simple interest of Rs. 840 for 2 years means the annual interest is 840 divided by 2, which equals 420. Since the rate is 6 percent, the principal is (420 * 100) / 6 = 7000. For compound interest payable half-yearly at 6 percent for one year, the rate per half-year is 3 percent, so the compound interest is 7000 * ((1.03)^2 minus 1) = 7000 * 0.0609. This results in an interest of Rs. 426.30.

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