The difference between the compound interest and the simple interest on an amount of ₹1,500 for 2 years, at a given rate of interest per annum, is ₹60. What is the rate of interest per annum, if in the case of compound interest, the interest is compounded annually?
Answer & explanation
Correct answer: option 1
The formula used here is,
Difference in the simple interest and compound interest on a certain sum at R% per annum in 2 years = (CI - SI) = $\frac{PR^2}{100^2}$
⇒ Difference in the simple interest and compound interest on a certain sum at R% per annum in 2 years = Rs. 60
⇒ 60 = $\frac{1500 ×R^2}{100^2}$
⇒ 60 = $\frac{3 ×R^2}{20}$
⇒ R = 20
Thus, Rate is 20%