Multiple choice

In compound interest what sum amounts to Rs.720/-in 2 years and Rs.864/-in 3 years?

  1. Rs.500

  2. Rs.600

  3. Rs.480

  4. Rs.550
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A Correct answer
Explanation

For compound interest, A = P(1+r)^n. 720 = P(1+r)^2 and 864 = P(1+r)^3. Dividing the second by the first: 864/720 = 1+r, so 1+r = 1.2. Then P = 720 / (1.2)^2 = 720 / 1.44 = 500.

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