If the difference between simple interest and compound interest on Rs. 5000 for 2 years is Rs. 72, what is the annual interest rate?

Explanation

Let the rate of interest be R%. The difference between compound interest and simple interest for 2 years is given by (P × R²) / 100² = 72. Substituting P = 5000, we get (5000 × R²) / 10000 = 72, which simplifies to 5 R² = 720. Solving for R, we find R = 12%. Thus, the interest rate is 12% per annum.