Jaishankar borrowed a sum of money from his employer at the rate of 8% per annum compound interest, compounded annually. He would have to pay ₹58,320 after a period of two years to finish the loan. How much did he borrow?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1 i.e. ₹50,000.
We know that,
A = P(1 + R/100)T
where, A = Amount, P = Principal, R = Rate and T = Time
⇒ 58320 = P(1 + 8/100)2
⇒ 58320 = P(1 + 2/25)2
⇒ 58320 = P × 27/25 × 27/25
⇒ P = Rs.50000