Multiple choice

If compound interest on a certain amount at a rate of 16% at the end of two years is 50% more than the simple interest on the same amount at the end of two years, then find the rate of interest offered in case of simple interest.

  1. 9.75%

  2. 10.45%

  3. 11.52%

  4. 12.25%

  5. 13.75%
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

CI = P(1+r/100)^2 - P. SI = P*R*2/100. CI = 1.5 * SI. P((1+0.16)^2 - 1) = 1.5 * (P*R*2/100). (1.16^2 - 1) = 0.03R. 1.3456 - 1 = 0.03R. 0.3456 = 0.03R. R = 11.52.

AI explanation

Using the formula for the difference between compound interest and simple interest for two years, we equate the given relationship as 16% of 16% equals 50% of the simple interest rate. This gives 2.56% equals 0.50 times the simple interest rate. Solving this yields a simple interest rate of 11.52%, making the result 11.52%.

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