A sum of money amounts to ₹1,49,940 in 2 years and to ₹1,57,437 in 3 years at compound interest. What is the rate of interest per year?

💡 Solution & Explanation

Between year 2 and year 3, the only change is one year's interest on ₹1,49,940: ₹1,57,437 − ₹1,49,940 = ₹7,497. So the rate = 7,497 ÷ 1,49,940 × 100 = 5%. Dividing by the larger amount instead gives 4.76%, which is wrong because interest is on the amount at the start of the year.