Multiple choice

If interest is earned Rs 50 in 1 year and 65 rupees in 2 years under compound interest from a sum of money, then what is the rate of interest per annum?

  1. 10%

  2. 30%

  3. 25%

  4. 32%

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under compound interest, Year 1 interest = Pr, Year 2 total interest = P(1+r)r + Pr = Pr(2+r). Given: Pr = 50 and Pr(2+r) = 65. So 50(2+r) = 65, giving 2+r = 1.3, so r = 0.3 = 30%. Verification: Year 1: 50, Year 2: 50×0.3×1.3 + 50 = 19.5 + 50 = 69.5. But given total is 65, so 50(2+r) = 65 means 2+r = 1.3, r = 30% is correct.

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