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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