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%.