Question

If the interest on any amount is calculated annually, then the compound interest is ?
1) Less than simple interest
2) Greater than simple interest
3) equal to simple interest
4) Can't say anything​

Answer 1

Given :  the interest on any amount is calculated annually,

To Find :  the compound interest is

1) Less than simple interest

2) Greater than simple interest

3) equal to simple interest

4) Can't say anything​

Solution:

compound interest is  simple interest till the period of compounding

. But after compounding period interest earned till then gets Added in principal amount

and Further interest is calculated on the new amount

Hence Compound Interest can never be less than Simile interest.

Compound interest = Simple interest   for a period less than or  equal to compounding period.

For any period more than compounding period , Compound interest always more than simple interest

Hence  Can't say anything​ as Period for calculating interest and compounding period are not given.

Correct answer is 4) Can't say anything​  

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