A sum of money is borrowed and paid back in two annual installments of Rs.882 each allowing 5% compound interest. What was the sum borrowed ?
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Solution:
Present worth of Rs. P due in n years.
Present worth = (P)/(1 + r/100)ⁿ
Therefore, Principal = (Present worth of Rs. 882 due 1 years hence) + (Present worth of Rs. 882 due 2 year hence)
= (882)/(1 + 5/100) + (882)/(1 + 5/100)²
= 882*100/105 + (882*100*100)/105*105
= 882/105 + 8820000/11025
= 840 + 800
= Rs.1640
The sum borrowed was Rs. 1640
Answer.
Present worth of Rs. P due in n years.
Present worth = (P)/(1 + r/100)ⁿ
Therefore, Principal = (Present worth of Rs. 882 due 1 years hence) + (Present worth of Rs. 882 due 2 year hence)
= (882)/(1 + 5/100) + (882)/(1 + 5/100)²
= 882*100/105 + (882*100*100)/105*105
= 882/105 + 8820000/11025
= 840 + 800
= Rs.1640
The sum borrowed was Rs. 1640
Answer.
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