Multiple choice

The compound interest for an amount of Rs. 1,200 calculated for 2 years, compounded annually is Rs. 123. The rate of interest will be

  1. 0.5%

  2. 5%

  3. 50%

  4. -6.7%
    • 67.98%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Compound interest formula: A = P(1 + r/100)^n. 1200 + 123 = 1200(1 + r/100)^2. 1323/1200 = (1 + r/100)^2. 1.1025 = (1 + r/100)^2. sqrt(1.1025) = 1.05. So r = 5%.

AI explanation

The amount after 2 years is the principal plus the compound interest, which is 1200 + 123 = 1323. Using the compound interest formula, 1323 = 1200 * (1 + R/100)^2, which simplifies to (1 + R/100)^2 = 1.1025. Taking the square root gives 1 + R/100 = 1.05, so R = 5. The rate of interest is 5%.

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