Multiple choice

Two separate investments of \$1,750 each are made for 2 years at simple interest in two different schemes. The difference between the simple interests earned is \$12.25. What is the difference between their annual rates of interest?

  1. 0.7%

  2. 0.8%

  3. 0.03%

  4. 0.35%

  5. 0.32%
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D Correct answer
Explanation

Simple interest is given by I = (P*R*T)/100. The difference in interest between two schemes with rates R1 and R2 is 12.25 = (1750 * (R1 - R2) * 2) / 100. Solving for (R1 - R2) gives 12.25 / 35 = 0.35%.

AI explanation

Let the annual interest rates be R1 and R2. Using the simple interest formula for the difference in interest, the equation is (1750 x R1 x 2)/100 - (1750 x R2 x 2)/100 = 12.25. Factoring out the common terms gives 35 x (R1 - R2) = 12.25. Dividing 12.25 by 35 results in a rate difference of 0.35%.

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