A sum becomes 1.96 times of itself in 2 years when invested at compound interest (compounding annually). What is the annual rate of interest?

40 percent

Amount = Principal × ( 1 + \(\frac{rate }{100}\) )^t

Let principal = P and Amount = 1.96P

1.96P = P × ( 1 + \(\frac{rate }{100}\) )²

\(\frac{196 }{100}\) = ( 1 + \(\frac{rate }{100}\) )²

\(\frac{14 }{10}\) = ( 1 + \(\frac{rate }{100}\) )

\(\frac{rate }{100}\) = \(\frac{4 }{10}\)

Rate = 40%