A sum of money becomes Rs.4,900 in 3 years and Rs.6,400 in 5 years on compound interest, compounded annually. Find the rate of interest p.a.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3 i.e. %.
A = P(1 + R/100)2
4900 = P(1 + R/100)3 ......(1)
6400 = P(1 + R/100)5......(2)
Now, eq(2)/eq(1)
⇒ 6400/4900 = P(1 + R/100)5/P(1 + R/100)3
⇒ 64/49 = (1 + R/100)2
⇒ 8/7 = 1 + R/100
⇒ 8/7 - 1 = R/100
⇒ 1/7 = R/100
⇒ R = 100/7 = %