Question

# A principal of Rs. 40,000 is compound annually at the rate of 10% for 2 years. What is the compound interest and is it greater than the simple interest for the same rate and the same time? Rs. 8400, yes Rs. 8400, no Rs. 8000, yes Rs. 7000, no

Solution

## The correct option is A Rs. 8400, yes According to question, interest is only for 2 years Principal, P=Rs. 40,000 In compound interest, interest is calculated annually. Amount after 1st year is A1 = 40,000×10100= Rs (4,000 + 40,000) = Rs. 44,000 Similarly A2=44,000×10100 = Rs 48,400 Sinple interest =P×r×t100 = 40,000×10×2100 = Rs, 8,000  ⇒ Amount = Rs. 48,000 The simple interest is Rs. 8000 and compound interest is Rs. 8400. Therefore, compound interest is greater than the simple interest.

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