Question : A sum becomes Rs. 7,436 in two years when interest is compounded annually at the rate of 4% per annum. What was the sum?
Option 1: Rs. 7,075
Option 2: Rs. 6,275
Option 3: Rs. 6,575
Option 4: Rs. 6,875
Correct Answer: Rs. 6,875
Solution :
Total amount = Rs.7,436
Rate of interest = 4%
Time = 2 years
$\text{Total Amount}=\text{Principal}×(1+\frac{\text{Rate}}{100})^{\text{Time}}$
⇒ $7436 = \text{Principal}×(1+\frac{4}{100})^2$
⇒ $7436 = \text{Principal}×(\frac{26}{25})^2$
⇒ $\text{Principal} = \frac{7436×25×25}{26×2}$
$\therefore \text{Principal} = 6875$
Hence, the correct answer is Rs. 6,875.
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