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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