Question

A sum of ₹ 20,000 yields ₹ 3328 as compound interest in 2 years. Find the rate of interest.

Answer 1

Given:

• Principal = ₹ 20000
• Compound interest = ₹ 3328
• Time period, T = 2 years

Compound interest = `P(1 + R/100)^T - 1`, where P is the principal, R is the rate of interest and T is the time period.

∴ `20000[(1 + R/100)^2 - 1] = 3328`

⇒ `(1 + R/100)^2 - 1 = 3328/20000`

⇒ `(1 + R/100)^2 = 3328/20000 + 1`

⇒ `(1 + R/100)^2 = 11664/10000`

⇒ `(1 + R/100)^2 = (108/100)^2`

⇒ `R/100 = 108/100 - 1`

⇒ `R/100 = 8/100`

⇒ `R = 8`

Hence, the required rate of interest is 8%.