Question
Download Solution PDFA sum of money is paid back in two annual instalments of Rs. 1,25,000 each. If rate of interest is 6% per annum and interest is compounding annually, then find the sum borrowed.(Consider round up integral value)
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Two annual installments of Rs. 1,25,000 each
Interest rate = 6% per annum, compounded annually
Concept:
Compound Interest formula and the concept of annuity.
Calculation:
The man paid rupees 1,25,000 as the amount at the end of the first year and another rupees 1,25,000, as the amount at the end of the second year.
Principal for the first year = 1,25,000/(1 + (6/100)) = 117924.5
Principal for the second year = 1,25,000/(1 + (6/100))2 = 111249.5
Total principal = 117924.5 + 111249.5 = 229174
Therefore, sum did he borrow is Rs. 229174.
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