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A certain sum becomes 3625\frac{36}{25} of itself after 2 years on compound interest. Find the rate of interest per annum.

Solution

Correct Option: 2

AP=(1+r100)n3625=(1+r100)2\frac{A}{P} = \left(1 + \frac{r}{100}\right)^n \Rightarrow \frac{36}{25} = \left(1 + \frac{r}{100}\right)^2.

Taking square root: 65=1+r100r100=15\frac{6}{5} = 1 + \frac{r}{100} \Rightarrow \frac{r}{100} = \frac{1}{5}. Hence r=20%r = 20\%.

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