Question

A certain sum of money at compound interest becomes 7396 in 2 year and 7950.70 in 3 year.find the rate of interest.

Answer 1

Answer:

The rate of interest is 7.5%

Explanation:

Let the rate of interest be r and the principal amount be P

The formula for final amount after t years is as:

A = P (1 + r / 100) ^t

For 2 year

7,396 = P (1 + r / 100) ^ 2          ............... Equation (1)

For 3 year

7,950.70 = P (1 + r/100) ^ 3        .............. Equation (2)

Dividing the equation (2) by (1) we will get:

7,950. 70 / 7,396 = P (1 + r/100) ^ 3 / P (1 + r / 100) ^ 2

1.075 = 1 + r / 100

1.075 - 1 = r /100

0.075 × 100 = r

r = 7.5 %

Note: ^ symbol is power of whole part.