Find the ratio of the simple interest and the compound interest on ₹100 at 10% per annum for 2 years, if, when compounded, interest is compounded annually.
Answer & explanation
Correct answer: option 2
Simple Interest = \(\frac{Principal ×Rate × Time }{100}\)
= \(\frac{100 ×10 × 2 }{100}\)
= 20
Compound Interest = Principal × ( 1 + \(\frac{rate}{100}\) )t - Principal
= 100 × ( 1 + \(\frac{10}{100}\) )² - 100
= 100 × \(\frac{11}{10}\) × \(\frac{11}{10}\) - 100
= 121 - 100
= 21
So , Ratio of simple interest to compound interest = 20 : 21