The compound interest received on ₹18,000 for 2 years is ₹7,920, when the interest is compounded annually. What is the rate of interest per annum?
Answer & explanation
Correct answer: option 3
The Formula that we used here is -
Amount = P$(1 \;+\; \frac{R}{100})^t$
Compound Interest = Amount - Principal
18000 + 7920 = 18000 [ 1 + \(\frac{R}{100}\)]²
25920 = 18000 [ 1 + \(\frac{R}{100}\)]²
\(\frac{25920}{18000}\) = [ 1 + \(\frac{R}{100}\)]²
(\(\frac{36}{25}\))² = [ 1 + \(\frac{R}{100}\)]²
\(\frac{6}{5}\) = 1 + \(\frac{R}{100}\)
\(\frac{R}{100}\) = \(\frac{1}{5}\)
R = 20%