Question

A sum of money invested at compound interest amounts to Rs. 1,600 in 2 years and Rs. 1,680 in 3 years. Find the rate of interest.
1. 5%
2. 6%
3. 5.5%
4. 6.5%

Answer 1

Correct Answer - Option 1 : 5%

Given:

Compound interest amount to Rs.1600 in 2 years

Compound interest amount to Rs.1680 in 3 years

Formula Used:

Compound Interest (CI) = P × (1 + R / 100)ⁿ

Calculation:

Let the Principle is P

⇒ CI in 2 years = P × (1 + R / 100)² = 1600   →   (1)

⇒ CI in 3 years = P × (1 + R / 100)³ = 1680   →   (2)

(2) / (1) = (1 + R / 100) = 21 / 20

⇒ R/100 = 1/20

∴ R = 5 %