A sum of money becomes ₹5100 after 3 years and ₹5950 after 4 years on compound interest. The rate of interest per annum is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 50/3%
Under compound interest, the amount after 4 years is the amount after 3 years plus one year’s interest on it. So the interest for the 4th year is earned on ₹5100, and the rate follows from it.
The growth from the 3rd year’s amount to the 4th year’s is one year’s interest: Interest for the 4th year \(=5950-5100=850\)
This interest is earned on ₹5100 in one year, so as a percentage of it: Rate \(\displaystyle =\frac{850}{5100}\times100=\frac{50}{3}\%\)