Multiple choice

The difference, after two years, between the compound interest and the simple interest on a certain sum of money invested at the same rate of interest is \$25. If the simple interest accumulated on the sum after two years is \$200, what is the rate of interest at which the sum of money was invested?

  1. 18%

  2. 20%

  3. 25%

  4. 28%

  5. 30%
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

SI for 2 years = 200, so SI for 1 year = 100. CI - SI for 2 years = 25. Formula: CI - SI = P(r/100)^2. Also SI = P*r*t/100 = 200. P*r = 10000. (P*r^2)/10000 = 25 -> (10000*r)/10000 = 25 -> r = 25%.

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