A sum of money becomes ₹2,000 in 3 years and ₹2,400 in 4 years, at the certain rate of yearly compound interest in case of annual compounding. Find the yearly rate of compound interest.
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. 20%
The sum becomes Rs2,000 in 3 years.
The sum becomes Rs2,400 in 4 years.
A = P(1 + R/100)t [Where, A = Amount, P = Principal, R = Rate and t = time in years]
2000 = P(1 + R/100)3 ....(1
2400 = P(1 + R/100)4 ....(2
Now, (2 ÷ (1 -
24/20 = ( 1 +R/100)
R/100 = 24/20 - 1
R/100 = (24 - 20)/20
R/100 = 1/5
R = 100/5 = 20%