The difference between the compound interest (compounded annually) and the simple interest on ₹40,000 for 2 years is ₹100. What is the rate of interest per annum?

0.25%Correct answerYour answer2.5%Correct answerYour answer5%Correct answerYour answer25%Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

$40000 \times \left(\frac{R}{100}\right)^2 = 100$ , so $\left(\frac{R}{100}\right)^2 = \frac{1}{400}$ .
$\frac{R}{100} = \frac{1}{20}$ , so $R = 5\%$ .

Worth noting

$R^2 = 25$ gives $R = 5$ , not 25; do not forget the square root. 0.25% is just 100 as a percentage of 40,000.

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

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

Explanation