A sum of Rs. 11700 becomes Rs. 16848 in 2 years at the rate of compound interest. If the interest is compounded annually, then what will be the rate of interest?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. 20%
Principal = 11700
Amount after 2 years = 16848
As, interest is compounded annually for 2 years, we have to square root both principal and amount and compare them to find the interest.
FORMULA USED:
Amount = Principal (1 +rate/100) t
Ratio of principal and amount = 16848/11700
Square root of ratio = 129.8/108.16 = 1.2
After 1-year amount is 1.2 times that of principal
Percentage change = (1.2 -1) × 100 = 20%