The difference between compound and simple interest on Rs. 15,000 for 2 years is Rs. 96. What is the annual rate of interest?

Problem restatement
For 2 years at rate r, CI − SI = P r². Use this identity to solve for r.

Given data

• P = 15,000; CI − SI = 96

Concept/Approach
For two years, CI = P(2r + r²) and SI = P(2r); their difference is P r².

Step-by-step calculation
P r² = 96 ⇒ 15,000 r² = 96r² = 96 ÷ 15,000 = 0.0064r = √0.0064 = 0.08 = 8% p.a.

Common pitfalls
Using 96 as one year difference (the identity holds specifically for 2 years).

Final Answer
8% p.a.