Question

Edward opened a Recurring deposit account in a bank. He deposited Rs 300 per month for 2 years. At the time of maturity he received Rs 7725. What was the rate of interest?

• A. 7%
• B. 7.5%
• C. 8%
• D. 9.5%

Answer 1

The correct option is A

7%

Equivalent principle for one month = Rs 300 $\times$ 24$\frac{(24+1)}{2}$

= Rs 300 $\times$ 12 $\times$ 25 = Rs 90000

Interest on Rs 90000 for 1 month = Rs 90000 $\times$ $\frac{1}{12}$ $\times$ $\frac{r}{100}$ = Rs 75r

Total amount deposited in 24 months = Rs 24 $\times$ 300 = Rs 7200

Amount of maturity = Rs (7200 + 75r)

Or 7725 = 7200 + 75r

7725 – 7220 = 75r or r = $\frac{525}{75}$ = 7

Hence the rate of interest = 7% p.a.