Question 19
A certain principal invested at compound interest payable yearly amounts to Rs. 10816.00 in 3 years and Rs. 11248.64 in 4 years. What is the rate of interest?
Explanation
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A = P(1 + r/n)nt
Where:
A = Accrued Amount (principal + interest)
P = Principal Amount
r = Interest Rate
t = Time Involved in years, 0.5 year is calculated as 6 months, etc.
n = number of compounding periods per unit t; at the END of each period
Given details in Question are,
Accrued amounts after 3 years is 10816.00
Accrued amounts after 4 years is 11248.64
P*(1+r)3=10816
P*(1+r)4=11248.64
Dividing both sides of the 2nd equation by both sides of the first equation
P*(1+r)4/(P*(1+r)3)=11248.64/10816
(1+r) = 11248.64/10816= 1.04
So, the rate of interest r is 0.04 or 4%
So, option 2 is the correct answer.