Question
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. 1900 and Rs. 1976 respectively. Find the rate of interest.
Solution
Simple interest for 1 year = 1900/2 = Rs. 950 Difference between compound Interest and Simple Interest for 2 years = 1976 – 1900 = Rs. 76 Desired rate = 76/950 × 100 = 8%
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