Question

Compound interest at the rate of 10% per year for two years is equal to simple interest for two years at an annual interest of ? A)11% B) 10% C)10.5% D) 1.5%

Answer 1

The answer is c)10.5 %
eg. if principle amount is 100
The amount with Compound interest at the rate of 10% in 1 year is
100+( (100x10)/100 )
= 100+10
=110

The amount with Compound interest at the rate of 10% in 2 years is
110+( (110x10)/100 )
= 110+11
=121

Now considering all the options,
a) Annual interest = 11%
SI for 1 year = 100+((100x11)/100)
=100+11
=111
SI for 2 years = 111+((100x11)/100)
=111+11
=122

b) Annual interest = 10%
SI for 1 year = 100+((100x10)/100)
=100+10
=110
SI for 2 years = 110+((100x10)/100)
=110+10
=120

c) Annual interest = 10.5%
SI for 1 year = 100+((100x10.5)/100)
=100+10.5
=110.5
SI for 2 years = 110.5+((100x10.5)/100)
=110.5+10.5
=121
Here both the amounts are equal so the required rate of interest for SI is 10.5%