Multiple choice

Jerman invested Rs. 27,000 at the rate of 13% simple interest per annum in a bank for two years. At how much more rate of compound interest per annum he would have yielded at least Rs. 4860 more on same amount in same number of years? (i) 3% (ii) 5% (iii) 7% (iv) 9% (v) 20%

  1. Only (iii), (iv) and (v)

  2. Only (i) and (ii)

  3. Only (iv) and (v)

  4. Only (v)

  5. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Simple Interest = 27000 * 0.13 * 2 = 7020. Compound Interest = 27000 * ((1+r)^2 - 1). We want CI - 7020 >= 4860, so CI >= 11880. (1+r)^2 - 1 >= 11880/27000 = 0.44. (1+r)^2 >= 1.44. 1+r >= 1.2, so r >= 0.2 or 20%.

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