Multiple choice

The difference between compound interest and simple interest on a certain sum of money after 2 years at 10% rate of interest is Rs. 200. Find the difference in the interests after 3 years.

  1. Rs. 620

  2. Rs. 600

  3. Rs. 400

  4. Rs. 420

  5. Rs. 300
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A Correct answer
Explanation

For 2 years, the difference between CI and SI is P(r/100)^2. Given 200 = P(0.1)^2, P = 20000. For 3 years, the difference is P(r/100)^2 * (3 + r/100) = 200 * (3 + 0.1) = 200 * 3.1 = 620.

AI explanation

Using the effective percentage method, the difference between compound interest and simple interest for 2 years at 10% is 10% of 10%, which equals 1% of the principal. Since this difference is Rs. 200, the principal is Rs. 20000. For 3 years at 10%, the effective difference percentage is 10% + 0.5% + 0.1% = 3.1% of the principal. Calculating 3.1% of Rs. 20000 gives a difference of Rs. 620.

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