Multiple choice

Ramesh invested 2,500 each in two investment schemes, viz., Compound Interest Scheme, interest being compounded annually and Simple Interest Scheme at same rate of interest. If the difference between the CI and SI is 100 after 2 years, what is the rate of interest per annum?

  1. 20%

  2. 18%

  3. 10%

  4. 5%
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A Correct answer
Explanation

Difference between CI and SI for 2 years = P * (r/100)^2. 100 = 2500 * (r/100)^2. 100/2500 = (r/100)^2. 1/25 = (r/100)^2. 1/5 = r/100. r = 20%.

AI explanation

Using the direct formula for the difference between compound interest and simple interest for two years, Difference = P * R^2 / 100^2. Substituting the given values, we get 100 = 2500 * R^2 / 10000. Simplifying this gives R^2 = 400, so R = 20. The result is 20 percent.

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