knight247 wrote:X invested some amount for 2 years at simple interest. Y invested the same amount for the same period at the same interest rate per annum but at compound interest with annual compounding. At the end of 2 years, apart from the amount invested, X received $200 as interest and Y received $220 as interest. What was the rate of interest in percent per annum?
(A)13%
(B)20%
(C)22%
(D)15%
(E)10%
The answer as per my calculation is [spoiler](B)[/spoiler]. Don't have an official OA. Detailed explanations would be appreciated. Than
We can plug in the answers, which represent the annual interest rate.
Since the amounts earned by X and Y are both multiples of 10, the correct answer also is likely a multiple of 10.
Answer choice B: 20% annual interest
For 20% interest to earn for X 200/2=100 per year, X must invest 500.
Thus, Y also invests 500.
Compounded interest for Y:
First year = .2*500 = 100.
New balance = 500+100 = 600.
Second year = .2*600 = 120.
Total interest earned = 100+120 = 220.
Success!
The correct answer is
B.
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