Multiple choice

Ram invested a certain amount of money and earned a compound interest of Rs. 420 in the second year and Rs. 462 in the third year. At what rate of interest did Ram invest?

  1. 9%

  2. 10%

  3. 11%

  4. None of these

  5. Cannot be determined
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest in 2nd year = 420, in 3rd year = 462. The increase of 42 is the interest on the 420 earned in the 2nd year. Rate = (42 / 420) * 100 = 10%.

AI explanation

In compound interest, the interest earned in any specific year is the principal for that year plus the accumulated interest multiplied by the rate. The interest for the third year is based on the amount at the end of the second year, so the rate is calculated as the difference in interest divided by the second year's interest: (462 - 420) / 420. This gives 42 / 420, which equals 0.10 or 10%.

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