Discussion
Compound interest earned on a sum for the second and the third years are Rs.1200 and Rs.1440 respectively. Find the rate of interest?
Answer: C
Each year's interest is the previous year's grown by the rate, because the balance itself grows by that factor.
\[ 1 + \frac{R}{100} = \frac{1440}{1200} = 1.2 \]
\[ R = 20\% \text{ p.a.} \]
The difference of Rs. 240 between the two years is exactly 20% of the earlier Rs. 1200 - the interest earned on that interest. Neither the principal nor the first year's interest is needed.
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