2022 · Q29
Suppose a bank gives an interest of 10% per annum compounded annually for a fixed deposit for a period of two years. What should be the simple interest rate per annum if the maturity amount after two years is to remain the same?
general-mental-abilityquantitative-aptitude
- A10%
- B10.5%
- C11%
- D12%
Explanation
At 10% per annum compounded annually for 2 years, Rs. P grows to P(1.10)^2 = 1.21P, i.e., interest of 0.21P. For simple interest at rate r% per annum over 2 years, interest = P × r × 2/100. Equating: 2Pr/100 = 0.21P gives r = 10.5%. Hence the simple interest rate must be 10.5% per annum — option B.