Question : At what rate of compound interest (compounding annually) per annum will a sum of Rs. 250000 becomes Rs. 275625 in 2 years?
Option 1: 8% per annum
Option 2: 3% per annum
Option 3: 10% per annum
Option 4: 5% per annum
Correct Answer: 5% per annum
Solution :
Given,
Amount = Rs. 275625
Principal = Rs. 250000
Time = 2 years
We know, $A = P(1 + \frac{R}{100})^n$
⇒ $275625=250000(1+\frac{R}{100})^2$
⇒ $(1+\frac{R}{100})^2=\frac{275625}{250000}$
⇒ $(1+\frac{R}{100})=\sqrt\frac{275625}{250000}$
⇒ $(1+\frac{R}{100})=\frac{525}{500}$
⇒ $\frac{R}{100}=\frac{525}{500}-1$
⇒ $\frac{R}{100}=\frac{25}{500}$
⇒ $R=\frac{25}{5}= 5$%
Hence, the correct answer is 5% per annum.
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