Multiple choice

If the simple interest on a sum of money for 2 years at 5% per annum is Rs 500, what is the compound interest (approximate) on the same at the same rate and for the same time?

  1. $508.25$
  2. $506.25$
  3. $512.5$
  4. $520.5$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Simple Interest for 2 years at 5% is Rs 500, so for 1 year it's Rs 250. Principal = 250/0.05 = Rs 5000. Compound Interest for 2 years at 5% on Rs 5000: Year 1 interest = 5000 x 0.05 = 250. Year 2 principal = 5250, interest = 5250 x 0.05 = 262.50. Total CI = 250 + 262.50 = 512.50. The claimed answer C is correct.

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