Multiple choice

On a certain principal if the simple interest for two years is Rs. 1400 and compound interest for the two years is Rs. 1449, what is the rate of interest?

  1. 7 percent

  2. 3.5 percent

  3. 14 percent

  4. 10.5 percent
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A Correct answer
Explanation

Simple interest for 2 years = 1400, so SI for 1 year = 700. Compound interest for 2 years = 1449. The difference (1449 - 1400 = 49) is the interest on the first year's interest. Rate = (49 / 700) * 100 = 7%.

AI explanation

Using the standard two-year interest identity, the difference between compound interest and simple interest is the simple interest earned in one year on the first year's interest. The compound interest of Rs. 1449 minus the simple interest of Rs. 1400 gives Rs. 49, which means the simple interest for one year is Rs. 700. Since Rs. 700 is the interest on the principal for one year, the interest for two years is Rs. 1400, meaning the principal is Rs. 10000. Dividing Rs. 700 by Rs. 10000 and multiplying by 100 gives a rate of 7 percent, making the result 7 percent.

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