Question

A sum of money compounded annually becomes Rs.625 in two years and Rs.675 in three years. The rate of interest per annum is:

• A. 7%
• B. 8%
• C. 6%
• D. 5%

Hint:

To find compound interest rate from yearly differences, use interest in one year over amount at the start of that year.

Answer 1

The Correct Option is B

We’re told: - Amount after 2 years = Rs. 625 - Amount after 3 years = Rs. 675 So interest for the 3rd year = $675 - 625 = 50$ \[ \text{Interest on Rs. 625 for 1 year = Rs. 50} \Rightarrow \text{Rate } = \frac{50}{625} \times 100 = 8% \] \[ \boxed{8%} \]