Compound interest on a sum at 10% p.a. for 2 years is Rs. 525. What is the simple interest on the same sum for twice the time at half the annual rate________?
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Answer: B. Rs. 500
Explanation
Compound interest for two years at ten percent creates an effective growth factor of zero point twenty-one on the principal. Dividing the compound interest amount of five hundred twenty-five by zero point twenty-one establishes the principal sum at twenty-five hundred. Calculating simple interest on this twenty-five hundred principal for twice the time, which is four years, at half the rate, which is five percent, yields five hundred. The two-year compound interest factor for a ten percent rate is calculated as one point one squared minus one, equaling zero point twenty-one. Simple interest is calculated by multiplying the principal by the interest rate and the total duration in years. Modifying time and rate parameters inversely in simple interest problems can sometimes keep the total return product constant.
Option A underestimates the simple interest return calculated from the correctly derived principal sum. Option C overshoots the simple interest calculation when using the twenty-five hundred principal base. Option D doubles the simple interest return incorrectly by misapplying the time and rate adjustments.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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