A sum of money amounts to ₹8,820 in 2 years and to ₹9,261 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 ₹8,820: ₹9,261 − ₹8,820 = ₹441. So the rate = 441 ÷ 8,820 × 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.