Simple interest and compound interest (compounded annually) earned on a sum at the end of 2 years at a certain rate of interest p.a. are Rs. 1200 and Rs. 1275 respectively. Find the rate of interest.
Simple interest for 1 year = 1200/2 = Rs. 600 Difference between compound Interest and Simple Interest for 2 years = 1275 - 1200 = Rs. 75 Desired rate = (75/600) × 100 = 12.5%
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