The compound interest on a certain sum at 20 % p.a. for 2 ½ years, compounded yearly, is ₹2 920. Find the principal.
Show answer & explanation
Correct answer: C
Explanation
Given:
Compound interest (CI) = 2920
Rate (R) = 20% per annum
Time (T) = 2.5 years
By formula:
A = P(1 + r)² × (1 + r/2)
CI = A − P
A = P(1 + 0.20)² × (1 + 0.20/2)
A = P × 1.44 × 1.10
A = 1.584P
2920 = 1.584P − P
2920 = 0.584P
P = 2920 ÷ 0.584
P = 5000
Principal = Rs. 5000