Question

At what rate per cent per annum will a sum of Rs. 7500 amount to Rs. 8427 in 2 years, compounded annually? 

A. 4% 

B. 5% 

C. 6% 

D. 8%

Answer 1

Present value, P = Rs.7500 

Amount, A = Rs.8427

Time, n = 2 years 

Now, 

Amount (A) = P (1 + R/100)ⁿ 

⇒ 8427 = 7500 (1 + R/100)² 

⇒ (1 + R/100)² = 8427/7500 

⇒ (1 + R/100)² = (53/50)² 

⇒ (1 + R/100) = (53/50) 

⇒ R/100 = 53/50 – 1 

⇒ R/100 = (53 – 50)/50 

⇒ R = 3/50 × 100 

⇒ R = 6 

∴ Rate = 6%