Multiple choice

The simple interest on a sum of money at 10% per annum for 2 years is Rs. 8,100. Compounded annually, what would be the compound interest (in Rs.) on the same sum for the same period at the same rate of interest?

  1. 8100

  2. 8505

  3. 8715

  4. 9000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

SI = P*10*2/100 = 8100, so P = 40500. CI = P(1 + 10/100)^2 - P = 40500(1.21 - 1) = 40500*0.21 = 8505. The compound interest is Rs. 8505, which is Rs. 405 more than the simple interest due to interest on interest.

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