Find the principal amount if the interest compounded annually at the rate of 10% for two years is ₹4,200.
Answer & explanation
Correct answer: option 2
Compound interest = \(\frac{15}{3}\)% = 5%
From the formula for compound interest, we know,
C.I = P(1+$\frac{R}{100})^t$– P
4200 = P [ 1 + \(\frac{10}{100}\) ]² - P
4200 = P [ \(\frac{11}{10}\) × \(\frac{11}{10}\) - 1 ]
4200 = P[ \(\frac{121}{100}\) - 1 ]
4200 = P [ \(\frac{21}{100}\) ]
P = 20000