Question : What is the rate of interest (in %), if simple interest earned on a certain sum for the 3rd year is INR 2,000 and compound interest earned in 2 years is INR 4,160?
Option 1: 8
Option 2: 10
Option 3: 12
Option 4: 6
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Correct Answer: 8
Solution :
It is given that simple interest for 3rd
year = INR 2000
Simple interest(SI) in first 2 years = 2000 + 2000 = INR 4,000 (since SI remains the same for the equal period at the same rate)
Compound interest(CI) in 2 years = 4160
The difference in (CI – SI) in 2 years = 4160 – 4000 = INR 160
Since this difference is the interest on the interest on 1st year.
160 = $\frac{2000×r}{100}$
$\therefore r=8$%
Hence, the correct answer is 8.
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