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The C.I. on a certain sum for 2 years Rs.41 and the simple interest is Rs.40. What is the rate percent?

Correct answer: B. 5%

  • A. 4%
  • B. 5%
  • C. 6%
  • D. 8%

Explanation

For 2 years, the difference between compound and simple interest is P(r/100)^2 = Rs. 41 - Rs. 40 = Rs. 1. Also, simple interest gives 2Pr/100 = Rs. 40, so Pr/100 = Rs. 20; hence (Pr/100)(r/100) = Rs. 1 gives r/100 = 1/20 and r = 5%. The likely mistake is choosing option a, 4%, by using the simple-interest amount alone and ignoring the extra compound-interest component.

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