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The compound interest on a certain sum of money for 2 years at 10 % per annum is Rs.420. The simple interest on the same sum at the same rate and for the same time will be_______?

Correct answer: D. Rs. 400

  • A. Rs.350
  • B. Rs.375
  • C. Rs. 380
  • D. Rs. 400

Explanation

For 2 years at 10% per annum, compound interest is P[(1.10)^2 - 1] = P x 0.21. Since the compound interest is Rs.420, P = Rs.420 ÷ 0.21 = Rs.2,000, and simple interest is Rs.2,000 x 10% x 2 = Rs.400. Students may choose Rs.350 by confusing the compound interest with the simple interest on a smaller principal.

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