The compound interest earned by Sunil on a certain sum at the end of two years at the rate of 16% p.a., when interest is compounded annually, was ₹864. What was the sum invested by Sunil?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. ₹2,500
compound interest = principal [(1 + Rate / 100) time -1]
The compound interest earned by Sunil on a certain sum at the end of two years at the rate of 16% p.a., when interest is compounded annually, was ₹864.
⇒ 864 = principal [(1 + 16/100)2 -1
⇒ 864 = principal [(116/100)2 - 1]
⇒ 864 = principal [(13456/10000 − 1)]
⇒ 864 = principal [3456/10000]
⇒ 864 × 10000/3456 = principal
⇒ 10000/4 = principal
⇒ Principal = 2500
So the sum invested by Sunil is 2500.