Multiple choice

A sum was invested at a compound interest payable annually. The interest in two successive years was Rs. 225 and Rs. 236.25, respectively. The rate of interest was:

  1. 4.5%

  2. 5%

  3. 8%

  4. 6.3%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The difference in interest (236.25 - 225 = 11.25) is the interest on the previous year's interest. Rate = (11.25 / 225) * 100 = 5%.

AI explanation

To find the rate of interest using the successive years' compound interest, apply the formula Rate = (Difference in Interest / Previous Year Interest) * 100. Here, the difference is 236.25 - 225 = 11.25. Dividing this by 225 gives 0.05, which equals a 5% rate of interest.

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