Question

A sum becomes 1.44 times of itself in 2 years when invested at compound interest (compounded annually). What is the rate of interest per annum? 
1. 21 percent
2. 30 percent
3. 25 percent
4. 20 percent

Answer 1

Correct Answer - Option 4 : 20 percent

Given:

A sum becomes 1.44 times of itself.

Time = 2 years

Formula used:

A = P(1 + R/100)T

Where,

A = Amount, P = Sum or Principal

R = Rate of interest

T = Time

Calculation:

Let the Principal be 100

Then Amount becomes 144

Now, A = P(1 + R/100)T

⇒ 144 = 100 × (1 + R/100⁾²

⇒ (144/100) = (1 + R/100)²

⇒ (12/10)² = (1 + R/100)²

Now, 12/10 = 1 + (R/100)

⇒ 2/10 = R/100

⇒ R = 20%

∴ The rate of interest is 20%.