Question

A certain sum of money is invested at a certain fixed rate compounded yearly. If the interest accured in two years is 44% of the sum borrowed, find the rate of compound interest.

• A. 15%
• B. 10%
• C. 20%
• D. 5%

Answer 1

The correct option is C

20%

Let the sum invested be $P$ and let the rate of interest be $r$.

Given that n = 2 years and C.I. = 44% of P
According to question;
$A=P+44\%$ of $P$ ----------------------(i)

$A=P(1+\frac{r}{100}{)}^2$ ----------------------(ii)

Equating (i) and (ii) , we get

P + 44% of P $=P(1+\frac{r}{100}{)}^2$
$\Rightarrow P\left(\frac{100+44}{100}\right)=P(\frac{100+r}{100}{)}^2$
$\Rightarrow P\frac{144}{100}=P(\frac{100+r}{100}{)}^2$
$\Rightarrow \frac{12}{10}=\frac{100+r}{100}$
$\Rightarrow 120=100+r$
$\Rightarrow r=20\%$