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Seema invested an amount of Rs 16000/- for two years at compound interest and received an amount of Rs 17640/- on maturity. What is the rate of interest ?


1. 8%
2. 5%
3. 4%
4. 3%

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Correct Answer - Option 2 : 5%

Given:

Seema invested an amount of Rs 16000/- for two years at compound interest and received an amount of Rs 17640/- on maturity.

Formula used:

Amount = Principal(1 + R/100)T

R = rate, T = time

Calculation:

According to the question,

Amount = Principal(1 + R/100)T

⇒ 17640 = 16000(1 + R/100)2

⇒ 17640/16000 = (1 + R/100)2

⇒ 1 + R/100 = √(1764/1600)

⇒  1 + R/100 = 42/40

⇒ R/100 = (42/40) – 1

⇒ R = (2/40)× 100

⇒ R = 5%

∴ The rate of interest is 5%.

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