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Question
The difference between C.I. payable annually and S.I. on Rs.50,000 for two years is Rs.125 at the same rate of interest per annum. Find the rate of interest.
Solution
Let the rate of interest per year be r%.
S.I. in 2 years = Rs.`(50000 xx "r" xx 2)/(100)`
= Rs.1000r
And, C.I. in 2 years
= A - P
= Rs.`50000(1 + "r"/100)^2` - Rs.50000
Given, C.I. - S.I. = Rs.125
⇒ `50000(1 + "r"/100)^2 - 50000 - 1000"r"` = 125
⇒ `50000(1 + "r"^2/10000 + (2"r")/100) - 50000 - 1000"r"` = 125
⇒ 50000 + 5r2 + 1000r - 50000 - 1000r = 125
⇒ 5r2 = 25
⇒ r2 = 25
⇒ r = ±5
But the rater of interest cannot ne negative.
∴ Rate of interest is 5%.
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