Question

Find the rate of interest at which Rs. 5,000 amounts to Rs. 5,304.5 in 2 years, compounded annually.

Answer 1

Given P = Rs. 5,000, A = Rs. 5,304.5 and n = 2 years, we have to find R.
Using the formula,
$A=P{(1+\frac{R}{100})}^n$,
we get
$5,304.5=5,000{(1+\frac{R}{100})}^2\Rightarrow \frac{5,304.5}{5,000}={(1+\frac{R}{100})}^2$
$\Rightarrow 1+\frac{R}{100}=\sqrt{\frac{5,304.5}{5,000}}=\frac{103}{100}$.
Hence,
$\frac{R}{100}=\frac{103}{100}-1=\frac{3}{100}$.
This implies that R = 3. Hence, the rate of interest is 3%