Multiple choice

Compound interest on a certain sum for two years is Rs. 618, whereas simple interest on the same sum at the same rate for two years is Rs. 600. The rate of interest per annum is

  1. 18%

  2. 9%

  3. 6%

  4. 3%
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For 2 years, CI - SI = P * (r/100)^2. 618 - 600 = P * (r/100)^2 => 18 = P * (r^2 / 10000). Also SI = (P * r * 2) / 100 = 600 => P * r = 30000. Substitute P = 30000/r: 18 = (30000/r) * (r^2 / 10000) = 3r. So r = 6%.

AI explanation

The difference between the compound interest and the simple interest for two years is the interest earned on the first year simple interest, so 618 minus 600 equals 18. Since the simple interest for one year is 600 divided by 2, or 300, the rate of interest is 18 divided by 300 multiplied by 100. This calculation gives a rate of 6 percent per annum.

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