The compound interest on a certain sum of money at a certain rate for 2 years is Rs. 40.80 and the simple interest on the same sum is Rs. 40 at the same rate and for the same time. The rate of interest is = ?

Solution (By Examveda Team)

Difference in CI and SI for 2 years
$$\eqalign{ & = \left( {40.80 - 40} \right) \cr & = {\text{Rs 0}}{\text{.80}} \cr & {\text{SI for first year }} \cr & {\text{ = }}\frac{{40}}{2} = {\text{Rs}}{\text{.}}\,20 \cr & {\text{Required Rate }}\% \cr & {\text{ = }}\frac{{0.80}}{{20}} \times 100 = 4\% \cr} $$