Question

Find the rate of interest if the difference between C.I and S.I on ₹ 8000 compounded annually for 2 years is ₹ 20.

• A. 5%
• B. 9%
• C. 10%
• D. 11%

Answer 1

The correct option is A 5%

Given,
principal (P) = ₹ 8000
time period (n) = 2 yrs.
rate of interest (R) = ?

We know that,
Difference between C.I & S.I is given by the formula,
C.I - S.I = P(1 + R/100)${}^n$

Difference between C.I & S.I is
given as ₹ 20,

Hence, putting the given values in the formula

⇒20 = 8000(R/100)${}^2$

⇒ (R/100)${}^2$ = 20/8000

⇒ (R/100)${}^2$ = 1/400

Taking square root on both sides,

⇒ R/100 = 1/20

⇒ R = 5

Hence, rate of interest compounded annually for 2 years is 5%