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The rate of compound interest at which a sum of Rs. 8000 amounts to Rs. 8820 in 2 years, is:Question Description : 6%5%4%

Question

The rate of compound interest at which a sum of Rs. 8000 amounts to Rs. 8820 in 2 years, is:

Question Description :

  • 6%
  • 5%
  • 4%
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Solution

The formula for compound interest is A = P(1 + r/n)^(nt), where:

  • A is the amount of money accumulated after n years, including interest.
  • P is the principal amount (the initial amount of money).
  • r is the annual interest rate (in decimal).
  • n is the number of times that interest is compounded per year.
  • t is the time the money is invested for in years.

Given in the problem:

  • A = Rs. 8820
  • P = Rs. 8000
  • t = 2 years
  • n = 1 (assuming the interest is compounded annually)

We need to find r.

Substituting the given values into the formula, we get:

8820 = 8000(1 + r)^(2)

Solving this equation for r, we get:

(8820/8000) = (1 + r)^2

1.1025 = (1 + r)^2

Taking the square root of both sides, we get:

1.05 = 1 + r

Subtracting 1 from both sides, we get:

r = 0.05

So, the annual interest rate is 0.05, or 5% when expressed as a percentage.

This problem has been solved

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