The simple interest on a sum of money for 2 years is Rs. 160, while the compound interest is Rs. 164. Find the rate of interest?

Explanation

Simple Interest for 2 years = Rs.160 Compound Interest for 2 years = Rs.164 Difference = Rs. 4 i.e. interest for one year’s interest = Rs.4 Simple Interest of 1 year = $\frac{160}{2}$ = Rs. 80 Rate of interest = $\frac{(Compound Interest - Simple Interest) \times 100}{Simple Interest \times Time}$ = $\frac{4 \times 100}{80 \times 1}$ $\therefore$ Rate of interest = 5%