Question

A invests Rs. 4000 at rate of interest 10% for 2 years compounded annually and B invests Rs. 5000 at rate of interest 15% for a year compounded annually. Find the ratio between the compound interests earned by A and B.

1. 28 : 25
2. 25 : 28
3. 23 : 27
4. 27 : 23

Answer 1

Correct Answer - Option 1 : 28 : 25

Given:

Sum of Rs. 4000 invested at rate = 10% for 2 years

Sum of Rs. 5000 invested at rate = 15% for a year

Formula:

Compound interest = P(1 + R/100)^N - P

Here, P = Principal, R = rate of interest and N = time period

Calculation:

Compound interest earned by A = 4000(1 + 10/100)² - 4000 = Rs. 840

Compound interest earned by B = 5000(1 + 15/100) - 5000 = Rs. 750

Required ratio = 840 : 750 = 28 : 25

∴ Required ratio is 28 : 25