Mathematics of FinanceMCQMTP Nov 20Question 1308 of 512
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The difference between simple interest and compound interest on a sum of 6,00,000\displaystyle 6,00,000 for two years is 6000\displaystyle 6000. What is the annual rate of interest?

Options

A8%\displaystyle 8\%
B10%\displaystyle 10\%
C6%\displaystyle 6\%
D12%\displaystyle 12\%
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Correct Answer

Option b10%\displaystyle 10\%

All Options:

  • A8%\displaystyle 8\%
  • B10%\displaystyle 10\%
  • C6%\displaystyle 6\%
  • D12%\displaystyle 12\%

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Detailed Solution & Explanation

**Derivation of Rate of Interest** Given: - Principal (P\displaystyle P) = Rs. 6,00,000\displaystyle \text{Rs. }6,00,000 - Time (t\displaystyle t) = 2\displaystyle 2 years - Difference between Compound Interest and Simple Interest (CISI\displaystyle CI - SI) = Rs. 6,000\displaystyle \text{Rs. }6,000 **Step 1: Use the difference formula for 2 years** Difference=P(r100)2\text{Difference} = P \left(\frac{r}{100}\right)^2 6000=600000(r100)26000 = 600000 \left(\frac{r}{100}\right)^2 6000=60r26000 = 60 r^2 r2=600060=100r^2 = \frac{6000}{60} = 100 r=100=10% per annumr = \sqrt{100} = 10\% \text{ per annum} Hence, **Option B** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

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