At the same rate of interest, in 2 years the simple interest is Rs 40 and the compound interest is Rs 41. What is the rate of interest?

A4%

B5% ✓ Correct

C8%

DNone of the above

Correct answer: (B) 5%

Explanation

The rate of interest is 5%.

For 2 years, SI = 40, so interest per year = 20.

CI - SI for 2 years = 41 - 40 = 1, the interest on the first year's interest.

So 1 = 20 x r / 100, giving r / 100 = 1 / 20.

r = 5%.

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