Multiple choice

If a sum amounts to 2,190 is four years and 2,409 in five years at compound interest, when the interest is compounded yearly, then the annual rate of interest

  1. 8%

  2. 10%

  3. 9%

  4. 11%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Amount after 4 years = P(1+r)^4 = 2190. Amount after 5 years = P(1+r)^5 = 2409. (1+r) = 2409/2190 = 1.1. So r = 0.1 or 10 percent.

AI explanation

The difference between the amounts for two consecutive years at compound interest represents the interest earned on the amount at the end of the fourth year. The interest earned in the fifth year is 2409 - 2190 = 219, so the rate of interest is (219 / 2190) * 100. This calculation results in an annual interest rate of 10%.

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