Identify in which type of interest rate is applied to the original principal and any accumulated interest ?

see full answer

Your Exam Success, Personally Taken Care Of

1:1 expert mentors customize learning to your strength and weaknesses – so you score higher in school , IIT JEE and NEET entrance exams.

An Intiative by Sri Chaitanya

Simple interest

Compound interest

Annual interest

Half-yearly interest

answer is B.

(Unlock A.I Detailed Solution for FREE)

Best Courses for You

JEE

NEET

Foundation JEE

Foundation NEET

CBSE

Detailed Solution

Concept: In the aforementioned question, we must check the box corresponding to the option that applies the interest rate to both the initial principal and any accumulated interest. In order to determine whether the interest rate for that specific form of interest is applied to both the initial principal and accrued interest, we must examine each choice independently.
We must verify which choice applies the interest rate to both the initial principal and accrued interest.
checking a choice (a) ,
Simple interest is calculated using the following formula, where the interest rate is only applied to the original principal:
S.I.=

\frac{p \times r \times t}{100}

You can see that "P" stands for the principal, "R" for the rate, and "T" for the time in years in the formula above. Additionally, you can see from the preceding formula that interest rate "R" is only applied to the principal and not on the cumulative interest (i.e. simple interest) .
As a result, this choice is flawed.
checking a choice (b) ,
Compound interest applies the current rate of interest to both the initial principal and the interest from earlier periods. To help you grasp this statement, we've provided the following compound interest formula:
C.I.=P(1+

\frac{r}{100}

) T−P
The terms "P" for principal, "r" for interest rate, and "T" for time in years are used in the calculation above. As you can see from the calculation above, the rate of interest is based on both the initial principle and the total interest paid over the course of prior periods.
As a result, both the initial principal and the accrued interests affect the interest rate on compound interest. As a result, choice (b) is the best one.
checking a choice (c) ,
Annual interest is annual interest, so in this case the interest rate is only based on the initial principal for a year.
As a result, this choice is likewise erroneous because the interest rate only considers the initial principal and not the total interest.
checking a choice (d) ,
Half-yearly interest is the interest that accrues after a half-year, therefore in this case, the interest rate is solely based on the initial principle and not on the total interest accumulated.
As a result, this choice is likewise erroneous because the interest rate only considers the initial principal and not the total interest.
After carefully examining the options, we have determined that the best choice is (b) .
Hence, the correct answer is option 2.

Watch 3-min video & get full concept clarity