Given that the interest is earned only on the principal, if an investment of…
2025
Given that the interest is earned only on the principal, if an investment of Rs. 1000.00 amounts to Rs. 1440.00 in 2 years, then what is the rate of interest earned?
- A.
20%
- B.
22%
- C.
21%
- D.
11%
Show answer & explanation
Correct answer: B
Concept: When interest accrues only on the principal (never on already-earned interest), growth follows the Simple Interest relation: Amount = Principal + (Principal × Rate × Time) / 100, so Rate = (Interest × 100) / (Principal × Time).
Applying to this problem:
Interest earned = Amount − Principal = 1440 − 1000 = 440.
Substitute into the rate formula: Rate = (440 × 100) / (1000 × 2).
Simplify: Rate = 44000 / 2000 = 22.
Cross-check: At 22% simple interest for 2 years on Rs. 1000, interest = (1000 × 22 × 2) / 100 = 440, giving an amount of 1000 + 440 = Rs. 1440, which matches the given amount — confirming the rate.
The rate of interest is 22%.