On simple interest, a certain sum of money amounts to ₹1,400 in 2 years and to ₹2,000 in 5 years. Find the rate of interest per annum.
- AOption (a)
16.67%
- BOption (b)
20%
- COption (c)
25%
- DOption (d)
11.11%
View answer & explanationHide answer & explanation
Correct answer
20%
Why this answer is correct
Shortcut Trick
Difference in Amount = Interest for the difference in Time.
Interest for (5 − 2) = 3 years → ₹2,000 − ₹1,400 = ₹600.
Interest for 1 year = ₹200. ⇒ Interest for 2 years = ₹400.
Principal (P) = Amount2yr − SI2yr = 1,400 − 400 = ₹1,000.
Rate % = (Interest1yr ÷ P) × 100 = (200 ÷ 1,000) × 100 = 20%.
∴ The correct answer is 20%.
Alternate Method
Given: Amount in 2 years (A1) = ₹1,400, Amount in 5 years (A2) = ₹2,000.
Formula: Amount = Principal + (P × R × T ÷ 100)
⇒ Simple Interest (SI) for 3 years = A2 − A1 = 2,000 − 1,400 = ₹600.
⇒ SI for 1 year = 600 ÷ 3 = ₹200.
⇒ SI for 2 years = 200 × 2 = ₹400.
⇒ Principal (P) = Amount after 2 years − SI for 2 years = 1,400 − 400 = ₹1,000.
⇒ Rate (R) = (SI × 100) ÷ (P × T) = (400 × 100) ÷ (1,000 × 2)
⇒ R = 40,000 ÷ 2,000 = 20%.
∴ The correct answer is 20%.
Additional Information
Simple Interest Constant Property
In SI, the interest earned remains the same every year because it is always calculated on the original Principal.
Effective Rate of Interest
Rate of Interest = (SI for 1 year ÷ Principal) × 100. This is the fastest way to find R once P is known.
Difference between SI and CI
For the first year (if compounded annually), SI and CI are equal. From the second year, CI > SI.