Multiple choice

If the compound interest on a certain sum for 2 yeas is Rs. 70. 70 and the simple interest is Rs. 70, then the rate of interest per annum is-

  1. 7%

  2. 3%

  3. 5%

  4. 2%
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Let P be the principal and r be the rate percent. SI for 2 years = P × r × 2/100 = 70, so Pr/50 = 70. CI for 2 years = P(1 + r/100)² - P = 70.70. Expanding: P(1 + 2r/100 + r²/10000) - P = 70.70, so 2Pr/100 + Pr²/10000 = 70.70. Substituting Pr = 3500: 2(3500)/100 + 3500r/10000 = 70.70, giving 70 + 0.35r = 70.70, so 0.35r = 0.70 and r = 2%.

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