A sum of money on compound interest amounts to Rs. 9680

A sum of money on compound interest amounts to Rs. 9680 in 2 yr and Rs. 10648 in 3 yr. What is the rate of interest per annum?

  1. 5%
  2. 10%
  3. 15%
  4. 20%

Answer

Let the sum of money be P and rate of interest i.

Amount after n years = P(1 + i)n 

So, we have P(1 + i)2 = 9680 and P(1 + i)3 = 10648 

Dividing the second equation by the first

1 + i = 10648 / 9680 = 1.1 = 1 + 0.1

i = 0.1 or 10%

The correct option is B.