A sum of money invested at compound interest amounts to Rs. 1,000 in 3 years and 1,200 in 4 years. Find the rate of interest.
Show answer & explanation
Correct answer: A
Explanation
Amount after 3 years = 1000
Amount after 4 years = 1200
A = P(1 + r)ⁿ
1000 = P(1 + r)³
1200 = P(1 + r)⁴
1200 / 1000 = (1 + r)⁴ / (1 + r)³
1.2 = 1 + r
r = 0.2 = 20%