Question

If the difference of the CI and the SI on a sum of money for 2 years is 1% of the sum of money then
find the annual rate of interest.
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Answer 1

Answer:

The other answer given is correct but I will formulate it differently in case that helps some readers

Firstly CI is compound interest

SI is simple intérêts

We are asked to solve for the rate r which in two years has a future value (1 + r )^2 and has we calculated the future value using Simple interest method it be 1% less

Therefore CI - SI = 0.01

So you can solve (1+r)^2 - (1 + 2 r ) = 0.01

Expand to 1+ 2r + r^2 -1 -2r = 0.01

r^2 = 0.01 therefore r = 0.01)^1/2

r = 0.10. Or 10%

Answer 2

Answer:

The annual rate of interest is 10%

Step-by-step explanation:

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