Compound Interest Comparison and Doubling Principal
CMAT 2023 · Quantitative Techniques & Data Interpretation · Easy · Compound Interest
Given below are two statements : Statement I: A savings account at Bank A pays 6.2% interest, compounded annually. Bank B's savings account pays 6% compounded semi-annually. Bank B is paying less total interest each year. Statement II: A sum of money at a certain rate of compound interest doubles in 3 years. In 9 years, it will be P times original principal. Then P = 9. In the light of the above statements, choose the correct answer from the options given below.
- A.
Both Statement I and Statement II are true
- B.
Both Statement I and Statement II are false
- C.
Statement I is true but Statement II is false
- D.
Statement I is false but Statement II is true
C
Explanation
Statement I: Bank A effective annual rate = 6.2% Bank B effective annual rate = Since 6.09% < 6.2%, Bank B pays less total interest each year. Statement I is true.
Statement II: If principal doubles in 3 years, in 9 years (3 periods of 3 years), it becomes times original principal. So , not 9. Statement II is false.
Hence, Statement I is true but Statement II is false.
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