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.

Answer 1

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%.