Multiple choice

Directions: Compare the two quantities in A and B. | Quantity A | Quantity B | | --- | --- | | Compound interest on principal amount of \$10000 at a rate of 10% compounded annually for 2 years | Simple interest on principal amount of \$10000 at a rate of 11% for 2 years |

  1. Quantity A is greater than quantity B.

  2. Quantity B is greater than quantity A.

  3. Both quantities are equal.

  4. Quantity A is either less than or equal to quantity B.

  5. The relationship between the quantities cannot be determined.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Quantity A: 10000 * (1.1^2 - 1) = 10000 * 0.21 = 2100. Quantity B: 10000 * 0.11 * 2 = 2200. Since 2200 > 2100, Quantity B is greater.

AI explanation

Using the effective rate formula for compound interest, 2 years at 10 percent gives an effective rate of 21 percent, making the compound interest 21 percent of 10000, which is \$2100. The simple interest is calculated as 10000 multiplied by 11 multiplied by 2 divided by 100, which equals \$2200. Because \$2200 is greater than \$2100, Quantity B is greater than Quantity A.

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