Question
Download Solution PDFA man borrows a certain sum of money and pays it back in 2 years in two equal instalments. If Compound Interest is reckoned at 5% per annum in case of annual compounding and he pays back annually Rs. 882, what sum did he borrow?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven Data:
Pays back annually Rs. 882 in 2 equal instalments.
Compound Interest is reckoned at 5% per annum.
Concept:
Compound Interest formula and the concept of annuity.
Calculation:
The man paid rupees 882 as the amount at the end of the first year and another rupees 882, as the amount at the end of the second year.
Principal for the first year = 882/(1 + (5/100)) = 840
Principal for the second year = 882/(1 + (5/100))2 = 800
Total principal = 840 + 800 = 1640
Therefore, sum did he borrow is Rs. 1640.
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