Rajeev invested Rs.3.000 for 2 years at compound interest (compounded annually) in a company which paid him interest of Rs.1,320. What will be the annual rate of interest at which Rajeev invested his money?
Answer & explanation
Correct answer: option 4
We know ,
Amount = Principal + Interest
= 3000 + 1320
= 4320
Now,
Amount = Principal × ( 1 + \(\frac{rate }{100}\) )t
4320 = 3000 × ( 1 + \(\frac{rate }{100}\) )²
\(\frac{4320 }{3000}\) = ( 1 + \(\frac{rate }{100}\) )²
\(\frac{144 }{100}\) = ( 1 + \(\frac{rate }{100}\) )²
(\(\frac{12 }{10}\))² = ( 1 + \(\frac{rate }{100}\) )²
\(\frac{12 }{10}\) = 1 + \(\frac{rate }{100}\)
\(\frac{rate }{100}\) = \(\frac{12 }{10}\) - 1
\(\frac{rate }{100}\) = \(\frac{2 }{10}\)
Rate = 20%