Question

A person invests Rs. 5000 for two year at a certain rate of interest compounded annually. At the end of one year this sum amount to Rs. 5600. Calculate the rate of interest per annum.

Answer 1

Principal amount invested , $P=\text{Rs.}5000$

Rate of interest, $R=?$

Time, $t=2\text{years}$

Amount, $A=\text{Rs.}5600$

$A=P(1+R{)}^t$

Substituting the values:

$5600=5000(1+R{)}^1$

$1.12=1+R$

$R=0.12$

$⟹R=\frac{12}{100}=12\%$