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%
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.
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