Multiple choice

If in 2 years, at simple interest, the principal increases by 16%, what will be the compound interest earned (in Rs.) on Rs. 25,000 in 2 years at the same rate?

  1. 4,000

  2. 2,160

  3. 2,000

  4. 4,160
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Simple interest for 2 years is 16%, so rate R = 8% per annum. Compound interest for 2 years at 8% = P * ((1 + 0.08)^2 - 1) = 25000 * (1.1664 - 1) = 25000 * 0.1664 = 4160.

AI explanation

Since the principal increases by 16 percent over 2 years at simple interest, the annual rate is 8 percent. Using the compound interest formula for 2 years, the total amount is 25000 multiplied by 1.08 squared, which equals 25000 multiplied by 1.1664, resulting in 29160. The compound interest earned is 29160 minus 25000, which equals 4160.

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