Question

At what rate per cent per annum will a sum of 7500 give 927 as compound intrest in 2 years

Answer 1

The compound interest accumulation factor is :

P(1 + i)ⁿ

P = deposited amount = 7500

n = time in years = 2

i = interest rate =?

Doing the substitution :

7500(1 + i)²

The interest is :

7500(1 + i)² - 7500 = 927

7500(1 + i)² = 927 + 7500

7500(1 + i)² = 8427

(1 + i)² = 8427/7500

(1 + i)² = 1.1236

1 + i = √1.1236

1 + i = 1.06

i = 1.06 - 1

i = 0.06

0.06 × 100 = 6%