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A man gets a simple interest of Rs.500 on a certain principal at the rate of 5% p.a in two years. Find the compound interest the man will get on twice the principal in two years at the same rate.

Correct answer: E. None of these.

  • A. Rs.500
  • B. Rs.250
  • C. Rs.5012.50
  • D. Rs.5062.50
  • E. None of these.

Explanation

From Rs. 500 = P x 5% x 2, the original principal is P = Rs. 500/0.10 = Rs. 5,000, so twice the principal is Rs. 10,000. Its two-year compound interest is Rs. 10,000 x [(1.05)^2 - 1] = Rs. 1,025, which is not listed, so option e is correct. Option a, Rs. 500, incorrectly reuses the simple interest from the first investment.

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