Question : A sum amounts to Rs. 6580 in 2 years and amounts to Rs. 7896 in 3 years on compound interest (compounding annually) at the same rate of interest. What is the annual rate of interest?
Option 1: 30%
Option 2: 40%
Option 3: 15%
Option 4: 20%
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Correct Answer: 20%
Solution :
The sum amounts to Rs. 6580 in 2 years and Rs. 7896 in 3 years.
Difference = 7896 – 6580 = 1316
The interest received by the third year is obtained from the amount at the end of 2 years
Now,
Simple interest = $\frac{\text{Principal × rate × time}}{100}$
⇒ $1316=\frac{6580\times\text{R}\times 1}{100}$
⇒ $\text{R}=20$%
Hence, the correct answer is 20%.
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