Question

Find the principal when the rate of interest is 5% per annum, time is 2 years, amount=1764 compound annually .

Answer 1

When you want to find a missing value then begin by assuming the answer to be a variable which may be any letter of english alphabet like a, b, c, x, y, z, etc.

Let the principal be ₹ P.

We are given,
Rate of interest, R = 5 % p.a. compounded annually
Time, T = 2 years
Amount, A = ₹ 1764

Now we are already aware of the formula to calculate the amount in case of compound interest,

A = P(1 + R/100)^T

Let's substitute the values we are given and the variable we have assumed.

1764 = P(1 + 5/100)^2
1764 = P(1 + 1/20)^2
1764 = P(21/20)^2
1764 = P * 21/20 * 21/20
P = 1764 * 20/21 * 20/21
P = 1764 * 400/441
P = 4 * 400
P = ₹ 1600

Therefore,
Principal = ₹ P = ₹ 1600