Multiple choice

A sum of Rs. $1,200$ becomes Rs. $1,323$ in $2$ years at compound interest compounded annually. Find the rate per cent.

  1. $8\%$
  2. $7\%$
  3. $6\%$
  4. $5\%$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Using the compound interest formula A = P(1 + r/100)^n, we have 1323 = 1200(1 + r/100)^2. Dividing by 1200 gives 1.1025 = (1 + r/100)^2. Taking the square root gives 1.05 = 1 + r/100, so r/100 = 0.05, meaning r = 5%.

AI explanation

Using the compound interest formula A = P(1 + R/100)^n, we have 1323 = 1200 x (1 + R/100)^2. Dividing both sides by 1200 gives (1 + R/100)^2 = 1.1025. Taking the square root of both sides results in 1 + R/100 = 1.05, so R = 5%. (Note: the marked answer of 5% is mathematically inconsistent, as 1323 is exactly a 10.25% total increase, which corresponds to a 5% annual rate).

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