On a certain principal, the compound interest, compounded annually, for the second year at 20% per annum is Rs.1,300. The principal is (consider the nearest integral value):
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Rs.5,416.
Compound interest for the second year = Rs 1300
1300 = Principal for 2nd year × 20/100
Principal for 2nd year = Rs 6500
Principal for 2nd year = Principal + Interest of 1st year
⇒ 6500 = P + (P × 20 × 1)/100
⇒ 6500 = 6P/5
⇒ P = Rs 5416.6