What is the rate of compound interest, if the interest on ₹10,000 for 2 years is ₹609, when interest is compounded annually?
Answer & explanation
Correct answer: option 1
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
Compound Interest on Rs 8000 for 2 years = 10000(1+$\frac{R}{100})^2$– 10000
609 = 10000((1+$\frac{R}{100})^2$- 10000
10609 = 10000((1+$\frac{R}{100})^2$
\(\frac{10609}{10000}\) = (1+$\frac{R}{100})^2$
1.0609 = (1+$\frac{R}{100})^2$
1.03 = 1 + \(\frac{R}{100}\)
\(\frac{R}{100}\) = 0.03
R = 3%