Question
Download Solution PDFIf the compound interest on a principal for one year is Rs. 200 and the compound interest for 2nd year is Rs. 240. Find the rate of interest.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
The compound interest for one year = Rs. 200
The compound interest for 2nd year = Rs. 240
Concept Used:
In the case of compound interest, the extra interest of the second year is the interest on the interest in the first year.
Calculation:
Let the rate of interest be R%
According to the question, we have
The difference between the interest of 2nd and 1st year = 240 - 200
⇒ Rs. 40
Now, The principal of the extra interest of 2nd year is the interest on the first year
⇒ The interest on Rs. 200 for 1 year is Rs. 40
According to the question,
(200 × R × 1)/100 = 40 [∵ For 1 year simple interest and compound interest are same]
⇒ 200 × R = 40 × 100
⇒ R = 20%
∴ The rate of interest is 20%
Shortcut Trick
Difference between 1st and 2nd year C.I = 240 - 200
⇒ 40
⇒ Rate = (40/200) × 100
⇒ 20%
∴ The rate of interest is 20%
Important Points
In the case of compound interest, the extra interest of the second year is the interest on the interest in the first year.
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