The ratio of the amount for 2 years under compound interest annually and for one year under simple interest is in the ratio 6 is to 5. When the rate of interest is the same then the value of the rate of interest is ?
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A = P ( 1 + r )^n compund interest
B = P (1 + n r) simple interest
A = P(1+r)²
B = P(1+r)
A/B = 6/5 => (1+r)² / (1+r) = 6 / 5
=> 1 + r = 6/5 => r = 1/5 = 0.2 => r = 0.2 * 100 = 20 %
B = P (1 + n r) simple interest
A = P(1+r)²
B = P(1+r)
A/B = 6/5 => (1+r)² / (1+r) = 6 / 5
=> 1 + r = 6/5 => r = 1/5 = 0.2 => r = 0.2 * 100 = 20 %
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