Multiple choice

A person invests Rs. 20,000 for three years at a certain rate of interest compounded annually. At the end of one year, this sum amounts to Rs. 22,400. What is the rate of interest per annum?

  1. 24%

  2. 10%

  3. 15%

  4. 12%
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D Correct answer
Explanation

For compound interest, A = P(1 + r/100)^n. 22400 = 20000(1 + r/100)^1. 1.12 = 1 + r/100, so r = 12%.

AI explanation

To find the rate of interest using the basic percentage increase method, we first find the interest earned in the first year by subtracting the principal from the amount: Rs. 22,400 minus Rs. 20,000 equals Rs. 2,400. The rate is then calculated by dividing this interest by the principal and multiplying by 100. Thus, (2400 divided by 20000) times 100 equals 12%. The rate of interest is 12%.

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