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If Rs.500 invested today grows to Rs.605 in 2 years, the compound interest rate per annum is
A5%
B12%
C10%
D8%
Answer & Solution
Correct answer: C. 10%
1. 605 = 500 * (1 + r)^2.
2. (1 + r)^2 = 605/500 = 1.21.
3. sqrt(1.21) = 1.10, so 1 + r = 1.10.
4. r = 0.10 = 10% per annum.
_Source: ICAI BoS Foundation Paper 3, Ch 4 'Math of Finance', p.8_
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