Multiple choice

A sum of money is invested at compound interest payable annually. The interest in two successive years was Rs. 225 and Rs. 238.50. Find the rate per annum.

  1. 5%

  2. 5.5%

  3. 6%

  4. 6.5%
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The difference in interest between two successive years is the interest on the interest of the previous year. Interest on 225 for one year is 238.50 - 225 = 13.50. Rate = (13.50 / 225) * 100 = 6%.

AI explanation

The compound interest for successive years increases by the rate percentage, meaning the difference of 238.50 - 225 = 13.50 is the interest on the first year interest. Using the formula Rate = (Difference / Previous Interest) * 100, we get Rate = (13.50 / 225) * 100 = 6 percent. The rate per annum is 6%.

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