Question
Download Solution PDFA sum of money was borrowed and paid back in two equal annual instalments of ₹980, allowing 4% compound interest. The sum (in ₹, to the nearest tens) borrowed was:
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Each installment = ₹ 980
Rate of interest = 4%
Number of years = 2
Formula used:
In case of compound interest, borrowed money = x/(1 + r/100) + x/(1 + r/100)2 + ..... + x/(1 + r/100)n
Calculation:
The borrowed money =
=
= [980 × (25/26)] + [980 × (25/26) × (25/26)]
= 980 [(25/26) + (25/26) × (25/26)]
=
= 980 × [(650 + 625)/676]
= 980 × (1275/676)
= 1848.372...
≈ 1850 (in ₹, to the nearest tens)
∴ The sum (in ₹, to the nearest tens) borrowed was ₹ 1850
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