Multiple choice

ABC payment bank offers an investment scheme 'Yojana' to its customers at simple interest in which the investment of the customers gets doubled in 8 years. In another investment scheme 'Prayas' offered by bank, the rate of interest is same as that in 'Yojana' but the scheme offers interest compounded annually. What percentage return will be received by a customer if he invests in investment scheme 'Prayas' for two years?

  1. 22.51%

  2. 26.56%

  3. 27.51%

  4. 28.15%

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest doubling in 8 years means rate = 100/8 = 12.5%. For compound interest over 2 years at 12.5%, the amount is P*(1.125)^2 = 1.265625*P. The return is 26.56%.

AI explanation

Using the simple interest formula, doubling a sum in 8 years means the interest earned equals the principal, so R * 8 / 100 equals 1, giving a rate of 12.5%. For the compound interest scheme over two years, the effective return percentage is calculated as R + R + (R * R) / 100. Substituting 12.5 into this formula gives 12.5 + 12.5 + 1.5625, totaling a return of 26.56%.

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