Multiple choice

Passage

Find the value of Q1 and Q2 and state the correct relationship.

Quantity I: Simple Interest on a sum of Rs 6200 at the rate of 6% per annum for 5 years Quantity II: Compound Interest on a sum of Rs 6400 at rate of 10% compounded semi-annually for one year.

  1. Quantity I > Quantity II

  2. Quantity I ≥ Quantity II

  3. Quantity II > Quantity I

  4. Quantity II ≥ Quantity I

  5. Quantity I = Quantity II or Relation cannot be established
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A Correct answer
Explanation

Quantity I: SI = P×R×T/100 = 6200×6×5/100 = Rs. 1860. Quantity II: Compounded semi-annually means rate = 10%/2 = 5% per period, 2 periods in 1 year. Amount = 6400×(1.05)² = 6400×1.1025 = 7056. CI = 7056-6400 = Rs. 656. Since 1860 > 656, Quantity I is greater.

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