The ratio of the amount for two years under compound interest annually and for…
2024
The ratio of the amount for two years under compound interest annually and for one year under simple interest is 6:5. When the rate of interest is same, then the value of rate of interest is:
- A.
20%
- B.
15%
- C.
18%
- D.
22%
Attempted by 21 students.
Show answer & explanation
Correct answer: A
Solution: Let the principal be P and the annual rate be r.
Amount after 2 years with compound interest = P(1 + r)^2.
Amount after 1 year with simple interest = P(1 + r).
Given ratio: P(1 + r)^2 : P(1 + r) = 6 : 5. Cancel P and divide both terms by (1 + r) to get 1 + r = 6/5.
Therefore r = 6/5 - 1 = 1/5 = 0.2 = 20%.