A 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?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is Option 2 i.e. Rs.1,640.
A = X/(1 + R/100)T
Principal = Present worth of Rs. 882 due 1 year + Present worth of Rs. 8820
⇒ 882/(1 + 5/100) + 882/(1 + 5/100)2
⇒ (882 × 100)/105 + (882 × 100 × 100)/105 ×105
⇒ 840 + 800 = Rs.1640