Multiple choice

Stephen lent \$5000 to his friend for 5 years. After 4 years, he got \$7320.5. The interest was compounded annually. Calculate the rate of interest.

  1. 9%

  2. 10%

  3. 11%

  4. 12%

  5. 13%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The amount received after four years is 5000(1 + r/100)^4 = 7320.5. Since 5000(1.1)^4 = 7320.5, the annual compound interest rate is 10%. The claimed option is correct.

AI explanation

Using the compound interest formula Amount = P(1 + R/100)^T, we substitute the given values to get 7320.5 = 5000(1 + R/100)^4. Dividing by 5000 results in (1 + R/100)^4 = 1.4641. Taking the fourth root of both sides gives 1 + R/100 = 1.1, meaning R/100 = 0.1, so the rate of interest is 10%.

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