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Question
Suppose a certain sum doubles in 2 years at r % rate of simple interest per annum or at R% rate of interest per annum compounded annually. We have ______.
Options
r < R
R < r
R = r
can’t be decided
Solution
Suppose a certain sum doubles in 2 years at r % rate of simple interest per annum or at R% rate of interest per annum compounded annually. We have R < r.
Explanation:
If the total amount received after 2 years is same for both simple interest and compound interest on same principal, then the rate of simple interest is greater than the rate of compound interest.
i.e. R < r
Hence, R < r
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