Multiple choice

A sum of money is invested at simple interest and the same amount is invested at the same rate of compound interest for one year compounded annually. What will be the minimum time in which the amount invested at simple interest becomes equal to the amount with the compound interest?

  1. 1 year

  2. 2 years

  3. 3 years

  4. None of these
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A Correct answer
Explanation

For 1 year, simple interest and compound interest (compounded annually) are identical. Thus, the minimum time is 1 year.

AI explanation

Using the compound interest formula for one year, A = P(1 + R/100)^1, which simplifies to P + PR/100. The simple interest amount after one year is given by the formula A = P + (PR * 1)/100, which is also P + PR/100. Since both formulas yield the exact same amount for a period of one year, the minimum time required is 1 year.

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