Multiple choice

The difference in simple and compound interest on a certain sum for 2 years at 5% per annum is Rs 75. Find the sum?

  1. Rs.40000

  2. Rs.20000

  3. Rs.50000

  4. Rs.30000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Rs 75 difference comes from compound interest calculating interest on the first year's interest. For 2 years at 5%, this difference equals P × (5/100)² = P × 0.0025. Setting this equal to 75 gives P = 75/0.0025 = Rs 30000. Simple interest stays the same each year, while compound interest includes interest on interest.

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