Two banks pay simple interest at different rates. On a deposit of Rs 3500 for 4 years, the interest from one bank is Rs 70 more than the interest from the other. What is the difference between their rates of interest?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 0.5%
The sum and the time are the same for both banks, so the difference in interest comes only from the difference in rates.
Let the rates differ by \(d\%\)
\(\displaystyle\frac{3500\times d\times4}{100}=70\)
\(\displaystyle d=\frac{70\times100}{3500\times4}=\frac{7000}{14000}=0.5\)
The rates differ by 0.5%.
Why the other options are incorrect
Option (1) 1% — Incorrect. A rate difference of 1% gives an interest difference of \(\displaystyle\frac{3500\times1\times4}{100}=140\), not Rs 70.
Option (3) 8% — Incorrect. A rate difference of 8% gives an interest difference of \(\displaystyle\frac{3500\times8\times4}{100}=1120\), not Rs 70.
Option (4) 2% — Incorrect. A rate difference of 2% gives an interest difference of \(\displaystyle\frac{3500\times2\times4}{100}=280\), not Rs 70.