Question

A borrowed Rs 10000 each from his friends B and C for 2 years. He was supposed to pay compound interest at 10% per annum to B and simple interest 11% per annum to C. Who charged more interest at the end of 2 years and how much more ?

• A. B, Rs 20 more
• B. B, Rs 80 more
• C. C, Rs 100 more
• D. C, Rs 120 more

Answer 1

The Correct Option is C

To determine who charged more interest and by how much, we need to calculate the interest charged by both B and C for the loaned amount.

Step 1: Calculate Compound Interest for B

The formula for compound interest is:
CI = P(1 + r/n)^nt - P

Where:
P = Principal amount = Rs 10000
r = Rate of interest = 10% = 0.10
n = Number of times interest applied per year = 1 (annually)
t = Time in years = 2

CI = 10000(1 + 0.10/1)^1×2 - 10000
CI = 10000(1.10)² - 10000
CI = 10000(1.21) - 10000
CI = 12100 - 10000
CI = Rs 2100

Step 2: Calculate Simple Interest for C

The formula for simple interest is:
SI = P × r × t

Where:
P = Principal amount = Rs 10000
r = Rate of interest = 11% = 0.11
t = Time in years = 2

SI = 10000 × 0.11 × 2
SI = 2200

Step 3: Determine Who Charged More
Comparing the interests:
B charged Rs 2100 and C charged Rs 2200.
C charged more by: 2200 - 2100 = Rs 100

Therefore, C charged Rs 100 more than B.