Question 66

If a sum increases by 21% after 2 years, then the rate of compound interest per annum, when compounded annually, must be:

Solution

Let the sum be Rs.100

According to question

Amount = $$\frac{21}{100}\times\ 100\ +\ 100=Rs.121$$

As we know,

$$A=P\left(1+\frac{R}{100}\right)^n$$

(where A = amount , P = principal, R = rate, n = number of years)

$$121=100\left(1+\frac{R}{100}\right)^2$$

$$\frac{121}{100}=\left(1+\frac{R}{100}\right)^2$$

$$\frac{11}{10}=1+\frac{R}{100}$$

R = 10 %

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