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The compound interest on a certain sum of money invested at a certain

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The compound interest on a certain sum of money invested at a certain  [#permalink]

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01 Oct 2018, 21:49
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Difficulty:

35% (medium)

Question Stats:

59% (01:03) correct 41% (02:56) wrong based on 18 sessions

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The compound interest on a certain sum of money invested at a certain rate of interest in the 2nd year and in the 3rd year was $600 and$720 respectively. What was the rate of interest at which the sum of money was invested?

(A) 12.0%
(B) 12.5%
(C) 15.0%
(D) 20.0%
(E) 25.0%

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The compound interest on a certain sum of money invested at a certain  [#permalink]

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01 Oct 2018, 23:01
Bunuel wrote:
The compound interest on a certain sum of money invested at a certain rate of interest in the 2nd year and in the 3rd year was $600 and$720 respectively. What was the rate of interest at which the sum of money was invested?

(A) 12.0%
(B) 12.5%
(C) 15.0%
(D) 20.0%
(E) 25.0%

Concept tested
The difference in the compound interests between any two consecutive years includes additional interest,
which is nothing but the interest calculated on the compound interest earned in the first of the consecutive
years.

In this problem, the compound interest for the amount is $600 for the second year & the interest calculated for the third year is$720. The difference in interest is $120, which is the interest earned on$600. We can
calculate the rate of interest as follows - $$\frac{120}{600} * 100 = 20%$$

Therefore, the rate of interest on which the amount was invested is 20%(Option D)
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The compound interest on a certain sum of money invested at a certain   [#permalink] 01 Oct 2018, 23:01
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