Multiple choice

Larry told Mark “If you pay back the borrowed money after three years, then you will have to pay approx. 30% more under CI as compared to SI”. Then the rate of interest will be closest to

  1. 20%

  2. 22%

  3. 25%

  4. 30%
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D Correct answer
Explanation

For 3 years, SI = 3*r*P/100 and CI = P*((1+r/100)^3 - 1). The condition CI = 1.3*SI leads to (1+r/100)^3 - 1 = 3*r/100 * 1.3. Solving this cubic equation for r yields approximately 30%.

AI explanation

Using the compound interest and simple interest formulas for three years, the difference is P times R divided by 100 cubed plus 3 times R squared, and this difference equals 30% of P. Dividing by P gives R cubed plus 300 R squared divided by 1000000 equal to 0.30, so R cubed plus 300 R squared equals 300000. Testing the options, an interest rate of 30% yields 27000 plus 270000 which totals 297000, making it the closest approximation.

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