CA Foundation · Quantitative Aptitude · Mathematics of Finance
A certain sum amounts to ₹5,832 after 2 years and ₹6,298.56 after 3 years when interest is compounded annually. What is the rate of interest per annum?
The rate is 8% per annum. Under annual compounding, the amount after 3 years divided by the amount after 2 years equals 1 + r. Here 6,298.56 ÷ 5,832 equals 1.08, so the rate is 8%.
- A6%
- B8%Correct
- C9%
- D10%
Explanation
The amount of the third year divided by that of the second year gives 1 + r. So 6,298.56 ÷ 5,832 = 1.08, hence r = 8%. Check: P = 5,832 ÷ 1.1664 = 5,000 and 5,000 × 1.08³ = 6,298.56.
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