Question

There are two statements given below regarding compound interest and simple interest for the same rate of interest for 2 years and rate of interest is compounded annually.

Statement 1: C. l. for $2^{nd}$ year > C.l. for $1^{st}$ year.
Statement 2: C.l. for $1^{st}$ year > S.l. for $1^{st}$ year.
Which amongst the following are true?

• A. Both statement 1 and statement 2 are true.
• B. Statement 1 is true, while statement 2 is false.
• C. Statement 1 is false, while statement 2 is true.
• D. Both statement 1 and statement 2 are false.

Answer 1

The correct option is B Statement 1 is true, while statement 2 is false.

For the first conversion period, S.I. = C.I. because the principal is the same for both the calculations.
But, for other conversion periods, C.I. > S.I. because the principal for C.I. calculation will be greater than the principal for the S.I. calculation.

Hence, statement 1 is true, while statement 2 is false.