Multiple choice

The difference between Simple Interest (SI) and Compound Interest (CI) earned on a principal of Rs. 16,000 each in the first 2 years is Rs. 40. Find the total CI earned.

  1. 1640

  2. 1600

  3. 840

  4. 800
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A Correct answer
Explanation

For two years, the difference between compound and simple interest is P(r/100)^2. Thus, 16000(r/100)^2 = 40, giving r = 5%. The total compound interest is 16000(1.05^2 - 1) = Rs. 1640.

AI explanation

The difference between compound interest and simple interest for two years is found using the formula Difference = P * (R/100)^2. Substituting the known values gives 40 = 16000 * (R/100)^2, which simplifies to (R/100)^2 = 1/400 and gives a rate of 5%. The compound interest for two years is calculated as 16000 * (1 + 5/100)^2 - 16000, which equals 16000 * 1.1025 - 16000, resulting in Rs. 1640.

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