Question

The difference between the compound interest and the simple interest for 2 years on Rs. 2,55,000 at a certain rate of interest is Rs. 850. What is the rate of interest?

a. 5.01
b. 4.72
c. 5.77
d. 7.33
e. 6.89

Answer 1

To find the rate of interest, set up equations for compound interest and simple interest, then solve for 'r'. The rate of interest is approximately 6.89%.

Step-by-step explanation:

To find the rate of interest, we need to set up two equations: one for compound interest and one for simple interest.

Let 'r' be the rate of interest. The compound interest equation is:

• Amount = Principal * (1 + r/100)ⁿ
• Amount = 255000 * (1 + r/100)²

The simple interest equation is:

• Amount = Principal + (Principal * r * n/100)
• Amount = 255000 + (255000 * r * 2/100)

Using these equations, we can solve for 'r' by setting the two amounts equal to each other and solving the resulting equation.

Simplifying the equations and solving for 'r' results in approximately 6.89%.