A man borrowed a sum of money and agrees to pay off by paying ₹6300 at the end of the first year and rs 8820 at the end of the second year . if the rate of compound interest is 5% per annum, find the sum borrowed.
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Answer:
For the payment of Rs. 43,200 at the end of the first year :
A = Rs. 43200 ; n = 1 year and r = 8 % . To find P.
A=P
1
(1+
100
r
)
n
⇒43200=P
1
(1+
100
8
)
1
⇒P
1
=Rs.43200×
108
100
=Rs.40000
For the payment of Rs. 34,992 at the end of the second year :
Rs.34922=P
2
(1+
100
8
)
2
⇒P
2
=Rs.34922×(
108
100
)
2
⇒P
2
=34922×
108
100
×
108
100
=Rs.30000
∴ Sum borrowed = Rs. 40000 + Rs. 30000 = Rs. 70000
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