Multiple choice

A sum of money amounts to Rs 500 in 2 years and Rs 540 in 3 years at compound interest per annum. Find the rate percent

  1. 5%

  2. 6%

  3. 7%

  4. 8%
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D Correct answer
Explanation

For compound interest, the ratio of amounts for consecutive years (A2/A1) gives (1 + r/100). Here, 540/500 = 1.08. Thus, 1 + r/100 = 1.08, so r = 8%.

AI explanation

Using the compound interest growth formula, the interest for the third year is the second year's amount multiplied by the rate, so 540 - 500 = 40. The rate is calculated as (40 / 500) * 100 = 8%. The rate percent is 8%.

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