Multiple choice

In the following questions, calculate quantity I and quantity II, compare them and answer Quantity I- Compound interest (in Rs.), A certain sum of money P at 5% per annum for 3 years. Quantity II-Simple interest (in Rs.), same sum of money P at 5.5% per annum for 3 years.

  1. If quantity I > quantity II

  2. If quantity I < quantity II

  3. If quantity I ≥ quantity II

  4. if quantity I ≤ quantity II

  5. if quantity I = quantity II or no relation can be established
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Quantity I (CI) = P * ((1 + 0.05)^3 - 1) = P * (1.157625 - 1) = 0.157625P. Quantity II (SI) = P * 0.055 * 3 = 0.165P. Since 0.157625 < 0.165, Quantity I < Quantity II.

AI explanation

Quantity I is calculated using the compound interest formula CI = P * [(1 + 5/100)^3 - 1], which becomes P * [1.157625 - 1] to equal 0.157625P. Quantity II is calculated using the simple interest formula SI = P * 5.5 * 3 / 100, which equals 0.165P. Comparing 0.157625P and 0.165P shows that Quantity I is less than Quantity II. Quantity I < quantity II.

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