The compound interest on ₹4,000 after 3 years is ₹630.50. Then the rate of interest compounded yearly is :
Answer & explanation
Correct answer: option 2
The formula that we used here is :-
Compound interest = Amount - Principal
Compound interest = P$(1 \;+\; \frac{R}{100})^t$ - P
630.50 = 4000 [ ( 1 + \(\frac{R}{100}\) )³ - 1 ]
\(\frac{1261}{8000}\) = [ ( 1 + \(\frac{R}{100}\) )³ - 1 ]
\(\frac{1261}{8000}\) + 1 = ( 1 + \(\frac{R}{100}\) )³
\(\frac{9261}{8000}\) = ( 1 + \(\frac{R}{100}\) )³
( \(\frac{21}{20}\) )³ = ( 1 + \(\frac{R}{100}\) )³
So, \(\frac{21}{20}\) = 1 + \(\frac{R}{100}\)
\(\frac{R}{100}\) = \(\frac{1}{20}\)
R = 5%
So, rate is 5%.