Question

Calculate the Sum of Money for Two Years
A sum of money fetches Rs. 4089 as compound interest at the rate of 4% per annum at the end of two years. What is the sum?

Answer 1

T = P(1+r/100)^n when the interest is compounded.

and the compound interest is T-P.

Given T-P = 4089, we need to find P.

4089 = P(1+4/100)^2 - P

or 4089 = 1.0816P-P

or 4089 = 0.0816P

Thus, P = 4089/0.0816 = 50,110.29.

Therefore, for a principal of Rs. 50,110.29, the compound interest is Rs. 4089 at the end of 2 years at 4% rate per annum.