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The ratio of the amount for 2 years under compound interest annually and for one year under simple interest is in the ratio 6 is to 5. When the rate of interest is the same then the value of the rate of interest is ?

Answer :

kvnmurty
A  =  P ( 1 + r )^n    compund interest
  B = P (1 + n r)    simple interest

A = P(1+r)² 
B =  P(1+r)           
A/B = 6/5      => (1+r)² / (1+r)  = 6 / 5
 =>  1 + r = 6/5  =>  r = 1/5 = 0.2  =>  r = 0.2 * 100 = 20 %


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