Multiple choice

Mr. X invested a sum at compound interest payable half yearly in May and November. If the compound interest in November, 2003 was Rs. 225 and in May, 2004 was Rs. 236.25, find the annual rate of interest.

  1. 7%

  2. 8%

  3. 9%

  4. 10%

  5. 12%
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

With half-yearly compounding, the interest for the second period is the interest of the first period plus the interest on that interest. 236.25 - 225 = 11.25. The rate r satisfies 225 * (r/200) = 11.25, so r/200 = 0.05, meaning r = 10%.

AI explanation

The interest for the half-yearly period increases from Rs. 225 to Rs. 236.25, giving an increase of Rs. 11.25. The rate of interest for this half-year is 11.25 / 225 * 100 = 5%. The annual rate of interest is twice this half-yearly rate, resulting in 10%.

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