Question

At what rate per annum will Rs. 32,000 yield a compound interest of Rs. 5,044 in 3 years being compounded annually.
1. 8%
2. 5%
3. 7%
4. 10%

Answer 1

Correct Answer - Option 2 : 5%

Given:

Principal = Rs. 32,000

Compound Interest = Rs. 5,044

Time = 3 years

Formula Used:

Amount = Principal{(1 + Rate/100)}^Time

Amount = Principal + Compound Interest

Calculation:

Amount = Principal{(1 + Rate/100)}^Time

⇒ 32000 +5044 = 32000{(1+ Rate/100)}³

 ⇒ 37044/32000 = {(1 + Rate/100)}³

 ⇒ 9261/8000 = {(1 + Rate/100)}³

⇒ (21/20)³ = {(1 + Rate/100)}³

⇒ 21/20 = 1 + (Rate/100)

⇒ Rate = 5%

∴ Rate is 5%.