Multiple choice

The simple interest on a certain sum of money at rate of interest 5% per annum for 2 years is Rs. 500. What is the compound interest on the same sum for the same period and at the same rate of interest?

  1. Rs.412.5

  2. Rs.400

  3. Rs.500

  4. Rs.512.5
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Simple interest (SI) = P * r * t / 100. 500 = P * 0.05 * 2, so P = 5000. Compound interest (CI) = P * ((1 + r/100)^t - 1) = 5000 * ((1.05)^2 - 1) = 5000 * (1.1025 - 1) = 5000 * 0.1025 = 512.5.

AI explanation

From the simple interest formula, 500 = (Principal x 5 x 2) / 100, which gives the principal as Rs. 5000. Using the compound interest formula for two years, the interest is P x [(1 + R/100)^2 - 1]. Substituting the values gives 5000 x [(1.05)^2 - 1] = 5000 x 0.1025, which equals Rs. 512.5.

Keep practicing — related questions