What is the yearly rate of compound interest, compounding annually at which a principal becomes Rs.500 in two years and Rs.700 in three years?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3 i.e. 40%.
Interest in one year = 700 - 500 = Rs.200
we know that S.I. and C.I. for 1 year are the same
⇒ S.I. = (P × R × T)/100
⇒ 200 = (500 × R × 1)/100
⇒ 200 = 5 × R
⇒ R = 40%