Multiple choice

If the compound interest for the 3rd and 4th years on a certain principal is Rs. 125 and Rs. 135, respectively, what is the rate of interest (in %)?

  1. 9

  2. 10

  3. 8

  4. 12

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Compound interest for year 3 is P(1+r)^2 * r = 125. For year 4 is P(1+r)^3 * r = 135. Ratio = (1+r) = 135/125 = 1.08. So r = 0.08 or 8%.