A sum becomes Rs 900 in 3 years and Rs 1000 in the fourth year on compound interest. What is the principal and the rate of interest?

ARs 695.80, 11.11%

BRs 625, 12.50%

CRs 656.10, 11.11% ✓ Correct

DRs 686, 12.50%

Correct answer: (C) Rs 656.10, 11.11%

Explanation

The principal is Rs 656.10 and the rate 11.11%.

Interest in the 4th year = 1000 - 900 = 100, earned on 900.

Rate = 100 / 900 x 100 = 11.11%, that is 1/9.

Amount after 3 years: 900 = P x (10/9)^3 = P x 1000 / 729.

P = 900 x 729 / 1000 = 656.10.

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