PRC-2 · Chapter 5 · Question 25 of 50
An investment of Rs. 1,000 grows to Rs. 1,500 over a period of 5 years with interest compounded annually. What is the approximate annual interest rate?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 8.45%
Explanation
Using S = P(1+r)^n: 1500 = 1000(1+r)^5. Dividing by 1000 gives 1.5 = (1+r)^5. Taking the 5th root (1.5^(1/5)) yields 1.08447. Subtracting 1 leaves 0.08447, which is 8.45%.
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