Discussion
A certain sum earns simple interest of Rs. 800 in 2 years at a certain rate of interest. If the same sum earns compound interest of Rs. 840 in the same period of 2 years, what must be the rate of interest?
Answer: C
Simple interest of Rs. 800 over two years is Rs. 400 a year. Compound interest exceeds it by
\[ 840 - 800 = \text{Rs. } 40 \]
which is one year's interest on that first Rs. 400:
\[ 400 \times \frac{R}{100} = 40 \quad\Longrightarrow\quad R = 10\% \text{ p.a.} \]
The sum works out at Rs. 4000, and \( 4000(1.21 - 1) = 840 \) confirms it - but the principal is not needed to answer.
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