Multiple choice

Rahul invested equal sums of money at compound interest under two schemes A and B. Under scheme A, the interest rate was 10% per annum and under scheme B, the interest rate was 12% p.a. The compound interest after two years on the sum invested in scheme A was Rs. 1,050. How much is the interest earned under scheme B after two years, if the interest is compounded annually in both schemes?

  1. Rs. 1,272

  2. Rs. 1,270

  3. Rs. 1,372

  4. Rs. 1,782
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A Correct answer
Explanation

Compound Interest for 2 years at 10% = P[(1 + 10/100)² - 1] = P[(1.1)² - 1] = P[1.21 - 1] = P(0.21). Given CI = Rs. 1050, so P = 1050 / 0.21 = Rs. 5000. For scheme B at 12% for 2 years: CI = 5000[(1 + 12/100)² - 1] = 5000[(1.12)² - 1] = 5000[1.2544 - 1] = 5000 × 0.2544 = Rs. 1272.

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