CA Foundation · Quantitative Aptitude · Mathematics of Finance
A certain sum grows under compound interest (compounded annually) to ₹8,820 after 2 years and to ₹9,261 after 3 years. What is the rate of interest per annum?
The rate is 5% per annum. The extra amount earned in the third year is ₹441, which is interest on the previous year's amount of ₹8,820. Dividing 441 by 8,820 gives 0.05, or 5%.
- A4%
- B5%Correct
- C5.5%
- D10%
Explanation
The growth in the third year is 9,261 − 8,820 = ₹441, which is interest on the 2-year amount. Rate = 441 / 8,820 = 0.05 = 5%. Check: 8,820 × 1.05 = 9,261, and the principal is 8,820 / 1.1025 = ₹8,000.
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