Multiple choice

If the simple interest on a sum of money for 2 years at 7% per annum is Rs. 70, what is the compound interest on the same at the same rate and for the same time?

  1. 72.45

  2. 72

  3. 70.25

  4. 60
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A Correct answer
Explanation

Simple interest for 2 years at 7% is 14% of the principal. 0.14P = 70, so P = 500. Compound interest for 2 years is P * ((1 + 0.07)^2 - 1) = 500 * (1.1449 - 1) = 500 * 0.1449 = 72.45.

AI explanation

Using the given simple interest of Rs. 70 for 2 years, the annual simple interest is Rs. 35, which makes the principal 35 multiplied by 100 and divided by 7, equaling Rs. 500. To find the compound interest for the same period, add the first year's interest of Rs. 35 to the second year's interest of Rs. 37.45, where the 7 percent interest is calculated on Rs. 535. This gives a total compound interest of Rs. 72.45.

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