Question

A sum is being lent at 20 % per annum compound interest.what is the ratio of increase in amount of 4th year to 5th year?

Answer 1

P(1+r/100)^4/P(1+r/100)^5
=1/(1+r/100) 
=100/100+r
=100/120
=5/6 
=5:6
 

                

Answer 2

Concept introduction:

Compound interest is when you receive interest on both your interest income and your savings. Let's imagine you invest $$1,000$ (your principal) and it earns $5$% once a year in interest or profits (the compounding frequency).

Given:

Here it is given that sum is being lent at $20$ % per annum compound interest.

To find:

We have to find what is the ratio of increase in amount of $4th$ year to $5th$year.

Solution:

According to the question, the sum is being lent at $20$ % per annum compound interest.

$P(1+r/100)^4/P(1+r/100)^5\\=1/(1+r/100) \\=100/100+r=100/120\\=5/6 \\=5:6$

Final answer:

The final answer of the question is the ratio will be $5:6$.

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