Multiple choice

The compound interest for a certain sum at 5% per annum for the first year is 25. The simple interest for the same money at 5% for two years will be rupees

  1. 40

  2. 50

  3. 60

  4. 70
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

CI for 1st year is the same as SI for 1st year. If SI for 1 year is 25 at 5%, the principal is 25 / 0.05 = 500. SI for 2 years at 5% = 500 * 0.05 * 2 = 50.

AI explanation

Using the simple interest formula SI = (P * R * T) / 100, the compound interest for the first year is simply the interest on the principal, so 25 = (P * 5 * 1) / 100. Solving this gives the principal P = 500. For simple interest over two years at 5%, the calculation is (500 * 5 * 2) / 100 = 50. The simple interest for two years is 50.

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