Multiple choice

Arun and Ajay borrowed Rs.400 each at 10% interest per annum. Arun borrowed at compound interest while Ajay borrowed at simple interest. In both the cases, the interest was calculated half yearly. At the end of one year -

  1. Both paid the same amount as interest

  2. Arun paid Rs.1 more as interest

  3. Ajay paid Rs.5 more as interest

  4. Ajay paid Rs.5 less as interest.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

For Rs. 400 at 10% for 1 year: Simple Interest = 400 * 0.10 = 40. Compound Interest (half-yearly) = 400 * (1 + 0.05)^2 - 400 = 400 * 1.1025 - 400 = 41. The difference is 1.

AI explanation

For Ajay's simple interest calculated half yearly at 5 percent per half year, the interest for one year is 400 times 5 times 2 divided by 100, which equals Rs. 40. For Arun's compound interest, the amount after one year is 400 times 1.05 squared, equaling Rs. 441, so his interest is Rs. 41. The difference is 41 minus 40, meaning Arun paid Rs. 1 more as interest.

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