CAT Practice : Percents, Profits

This problem will help you to choose between SI and CI when you plan to save money!!


    Q.17: Ram deposits Rs. P with a bank at r% compound interest and sees it reach Rs.16P in 20 years. If he had invested the same amount at r% simple interest for 20 years, what would be the amount?
    1. Between Rs. 2P and 2.5P
    2. Between Rs. 2.5P and 3P
    3. Between 3P and 3.5P
    4. Between 3.5P and 4P


  • Correct Answer
    Choice D. Between 3.5P and 4P

Explanatory Answer

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Detailed Solution

P (1 + r)20 = 16P

(1 + r)20 = 16

In order for the money to double, the approximate formula for r = 72/n = 14.4% .

Rate of interest should be roughly 14 – 15%

If he had invested this in simple interest,

A = P + P * 20 *(14 to 15 %)/100 = 3.8P to 4P

Answer choice (d)

Correct Answer: Between 3.5P and 4P

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