Question
At what annual rate of compound interest (compounded yearly) will Rs 5000 amount to Rs 5832 in 2 years?
Solution
Let rate = r per year. Amount A = P(1 + r)² 5832 = 5000(1 + r)² (1 + r)² = 5832 / 5000 = 1.1664 Take square root: 1 + r = √1.1664 = 1.08 r = 1.08 − 1 = 0.08 = 8% Answer: Rate of interest = 8% per annum.
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