Multiple choice

On a certain sum of money, simple interest for 2 years is Rs.550 at the rate of 5% per annum. If it was invested compound interest at the same rate for the same duration as before, how much more interest would be earned.

  1. Rs.14

  2. Rs.13.75

  3. Rs.12.65

  4. Rs.13.55

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

SI for 2 years = Rs.550 at 5%, so SI for 1 year = Rs.275. Principal = 275/0.05 = Rs.5500. CI for 2 years = 5500 × (1 + 0.05)² - 5500 = 5500 × 1.1025 - 5500 = 6063.75 - 5500 = Rs.563.75. Difference = CI - SI = 563.75 - 550 = Rs.13.75. Option B is correct.

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