Question

A sum under compound interest, interest being compounded annually amounts to 4500 in two years and 5400 in three years. What is the rate of interest?
1. 10%
2. 20%
3. 30%
4. 12%

Answer 1

Correct Answer - Option 2 : 20%

Given:

A sum amount 4500 in two years and 5400 in three years

Concept:

Amount = P × [(1 + R/100)ⁿ]

P = Principal

R = Rate of interest

n = No. of years

Calculation:

Let the sum be P and the rate of interest be R% per annum

P × (1 + R/100)² = 4500      ----(1)

P × (1 + R/100)³ = 5400      ----(2)

Dividing (2) by (1),

⇒ 1 + R/100 = 1.2

⇒ R = 20%

∴ The required result will be 20%.