Question

The compound interest on ₹ 4,000 after 3 year is ₹ 630.50. Then the rate of interest compounded yearly is:
1. 7%
2. 8%
3. 6%
4. 5%

Answer 1

Correct Answer - Option 4 : 5%

Given:

Principal = Rs. 4000

Compound Interest = Rs. 630.50

Time = 3 year

Formula used:

Compound Interest = Principal[(1 + Rate/100)^time – 1]

Calculation:

Compound Interest = Principal[(1 + Rate/100)^time – 1]

⇒ 630.50 = 4000[(1 + rate/100)³ – 1]

⇒ 630.50/4000 = [(1 + rate/100)³ – 1]

⇒ (1261/8000) + 1 = [(1 + rate/100)³]

⇒ 9261/8000 = [(1 + rate/100)³]

⇒ ∛(9261/8000) = [(1 + rate/100)]

⇒ 21/20 = [(1 + rate/100)]

⇒ 21/20 – 1 = rate/100

⇒ 1/20 = rate/100

⇒ rate = 5%

∴ The rate of interest compounded yearly is 5%.