Question

At what rate percent will a sum of Rs. 1000 amount to Rs. 1102.50 in 2 years at compound interest?

Answer 1

Given details are,

Principal = Rs 1000

Amount = Rs 1102.50

Rate = R% per annum

Let time = 2 years

By using the formula,

A = P (1 + R/100)n

1102.50 = 1000 (1 + R/100)2

(1 + R/100)2 = 1102.50/1000

(1 + R/100)2 = 4410/4000

(1 + R/100)2 = (21/20)2

1 + R/100 = 21/20

R/100 = 21/20 – 1

= (21-20)/20

= 1/20

R = 100/20

= 5

∴ Required Rate is 5%.