Simple interest on a principal at 4% per annum over 2 years equals Rs. 80. Find the compound interest for the identical term and rate_______?
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Answer: A. Rs.81.60
Explanation
Simple interest of 80 rupees over two years at 4 percent implies a principal of 1000 rupees. Compound interest accounts for interest earned on previous interest over the same term. Applying the compound interest formula to the principal yields 81.60 rupees. Simple interest is calculated as principal multiplied by rate multiplied by time divided by 100. Principal equals 80 multiplied by 100 divided by 4 times 2 which is 1000. Compound interest equals principal times one plus rate over 100 raised to time minus principal.
Banking products utilize compound interest for savings accounts and long-term investments. Comparing simple and compound interest helps consumers choose advantageous loan products. Financial planning requires accurate forecasting of exponential growth over time. Choosing 160 rupees represents the simple interest for a longer or doubled term. Choosing 1081.60 rupees incorrectly adds the principal amount to the final interest earned. Choosing 99 rupees is an arbitrary value unrelated to the compound interest formula.
- Subject
- Mathematics
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- Mathematics
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- —
- Difficulty
- medium
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