Multiple choice

If the amount received at the end of 2nd and 3rd year at compound interest on a certain principal is Rs. 33708, and Rs. 35730.48 respectively, what is the rate of interest?

  1. 6%

  2. 3%

  3. 12%

  4. 10%
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A Correct answer
Explanation

Amount after 2 years = P(1+r)^2 = 33708. Amount after 3 years = P(1+r)^3 = 35730.48. (1+r) = 35730.48 / 33708 = 1.06. r = 0.06 or 6%.

AI explanation

Using the compound interest growth formula, the interest earned in the third year is the difference between the amounts at the end of the third and second years: 35730.48 - 33708 = 2022.48. The rate of interest is this third-year interest divided by the amount at the end of the second year, multiplied by 100: (2022.48 / 33708) * 100. This calculation gives exactly 6%.

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