A sum of money invested on compound interest amounts to Rs. 672 in 2 years and to Rs. 714 in 3 years. What is the rate of interest per annum?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 6.25%
Under compound interest, the amount of the third year is the amount of the second year plus one year’s interest on it. So the rise from Rs. 672 to Rs. 714 is the interest for one year on Rs. 672.
Interest in the third year: \(714-672=42\)
Rate \(=\displaystyle\frac{42}{672}\times100=6.25\%\)