Question

Approximately what annual compound interest rate would you be paying if you paid off a principal of Rs 100000 in two years with annual payments of Rs 60,000 ?

Answer 1

Acc to the ques,

Principal = Rs 100000

Time = 2 years

Rate = ?

Compound Interest = Rs 120,000

or, 120,000 = 100000((1+r)/100)²

or,12000 = (100+r)²

or, 100+r = $\sqrt{12000}$ = 109.54

or, r = 109.54 - 100 = 9.54 %

Therefore, the rate of interest is 9.54%.