A invests a sum for two years. He receives 5% interest for the 1st year and 8% interest for the 2nd year, the interest being compounded annually. The amount received after 2 years is Rs 24948. Find the sum.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs 22000
Under annual compounding each year's rate acts on the amount at the start of that year, so the sum is multiplied by 1.05 and then by 1.08.
Amount \(=P\times1.05\times1.08=1.134P\)
\(1.134P=24948\)
\(\displaystyle P=\frac{24948}{1.134}=22000\)
The sum is Rs 22000.