alleryFor 10,000 at 10% per annum for 2 years, compound interest exceeds simple interest by:
A100
B50
C150
D200
Answer & Solution
Correct answer: A. 100
1. Simple interest is 10000 x 10 / 100 x 2 = 2000.
2. For compound interest, year one gives 1000 and the amount becomes 11000.
3. Year two gives 10 per cent of 11000 = 1100, so compound interest totals 2100.
4. The difference is 2100 - 2000 = 100.
5. This matches the standard two-year result, P x R^2 / 100^2 = 10000 x 100 / 10000 = 100.
_Source: syllabus Maths, Ch 7 'Comparing Quantities', S7.4 Compound Interest_
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