Question : The difference between compound interest and simple interest on a sum of Rs. 16,000 for two years is Rs. 160. Find the per annum rate of interest.
Option 1: 12%
Option 2: 10%
Option 3: 11%
Option 4: 15%
Correct Answer: 10%
Solution :
Given: Principal = Rs. 16,000
Time = 2 years
We know, Difference between compound interest and simple interest = $P(\frac{r}{100})^2$, where $P$ = Principal, $r$ = Rate of interest
⇒ $160=16000(\frac{r}{100})^2$
⇒ $\frac{r^2}{10000}×100=1$
⇒ $r^2=100$
$\therefore r =10$%
Hence, the correct answer is 10%.
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