What is the rate of compound interest, if the interest on ₹ 10,000 for 2 years is ₹ 609, when interest is compounded annually?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. 3% per annum
Given:
Principal = 10000
Rate = R
Time = 2 years
CI = 609
Formula used:
Amount = P(1 + R/100)T ----- (1)
Where, P = principal, R = rate and T = time
Calculations:
Using equation (1), we get
Amount = 10000 + 609 = 10609
⇒ 10609/10000 = (1 + R/100)2
⇒ 103/100 = 1 + R/100
⇒ 3/100 = R/100
⇒ R = 3%