A sum of money is paid back in two annual instalments of Rs. 1,25,000 each. If the rate of interest is 6% per year and interest is compounding annually, then find the sum borrowed. (Consider rounding up integral value.)
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Rs.2,29,174
Formula used
For instalment at CI, P = x/{1 + (R/100)} + x/{1 + (R/100)}2
Given that
The two annual instalments of (x = Rs. 1,25,000) each
The rate of interest per year (R) is 6 %
Calculation
P = 125000/{1 + (6/100)} + 125000/{1 + (6/100)}2
P = 125000/{106/100)} + 125000/{106/100}2
P = 117924.52 + 111249.56 = 229174.08
Hence, the sum borrowed is Rs. 229174