Hari has ₹10,000 to invest for 2 years. Scheme P pays 12% per annum simple interest; Scheme Q pays 11% per annum compounded annually. Which scheme earns more interest, and by how much?

Scheme P, by ₹79Correct answerYour answerScheme P, by ₹200Correct answerYour answerScheme Q, by ₹121Correct answerYour answerBoth earn the sameCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Scheme P: SI = $12\% \times 2 = 24\%$ of ₹10,000 = ₹2,400.
Scheme Q: amount = $10000 \times (1.11)^2 = 10000 \times 1.2321 = 12321$ , so CI = ₹2,321.
Scheme P earns ₹2,400 − ₹2,321 = ₹79 more.

Worth noting

₹121 is only the compounding bonus at 11% $(10{,}000 \times 0.11^2)$ . It does not make up for the 1% lower rate over 2 years, which costs ₹200.

Concept: Comparing simple and compound interest at different rates
Typical timeTypical: 75 s
Your timeYours: —

The rule this testsCompound interest

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Ten questions from Simple & Compound Interest, at your own pace.

Hari has ₹10,000 to invest for 2 years. Scheme P pays 12% per annum simple interest; Scheme Q pays 11% per annum compounded annually. Which scheme earns more interest, and by how much?

Explanation