The difference between simple and compound interest on Rs. 5000 for 2 years is Rs. 72. Find the interest rate?
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Answer: B. 12%
Explanation
The difference between compound and simple interest over two years is equal to the principal times the interest rate squared. Substituting seventy-two for the difference and five thousand for the principal forms an equation for the rate. Solving the squared rate equation yields zero point zero twelve, which corresponds to an interest rate of twelve percentage. The two-year interest difference formula provides a direct algebraic link between principal, rate, and difference. Simple interest grows linearly, whereas compound interest grows exponentially over multi-year periods. Solving quadratic rate equations requires extracting square roots of decimal values accurately.
Financial analysts use interest difference formulas to evaluate the cost implications of loan agreements. Banking professionals verify interest calculations to ensure accuracy in customer statement disclosures. Quick formula application saves valuable time when solving quantitative reasoning test questions. Option A suggests a ten percentage rate which generates a lower interest difference than seventy-two. Option C proposes a six percentage rate that produces an interest difference far below the given amount. Option D suggests an eight percentage rate that fails to satisfy the two-year interest difference equation.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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