If the interest is payable annually, then the principal amount on which the compound interest for 2 years at 5% per annum is ₹369, is given by
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹3600
With interest compounded annually, the amount after 2 years at \(r\%\) is \(P\left(1+\frac{r}{100}\right)^2\), and compound interest is this amount minus the principal.
At 5%, the amount is \((1.05)^2P=1.1025P\)
Compound interest \(=1.1025P-P=0.1025P\)
\(0.1025P=369\), so \(\displaystyle P=\frac{369}{0.1025}=3600\)
The principal is ₹3600.