QQuestion
If the rate of simple interest and compound interest are both 10% per annum, then the ratio of simple interest and compound interest in second year of a certain principal will be –
(a) 20 : 21
(b) 10 : 11
(c) 5 : 6
(d) 1 : 1
✓Answer
(b) 10 : 11
Explanation:
Simple interest for one year = P × r. So SI in the second year = P × r.
Compound interest earned in the second year = interest on the amount at the start of year 2 = P × r × (1+r).
So, Ratio = SI : CI = 1 : (1+r).
For r = 10% = 0.1, Ratio = 1 : 1.1 = 10 : 11.
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