Question : What is the present value of INR 9,360 at an interest rate of 20% at the end of two years compounded annually?
Option 1: INR 6,400
Option 2: INR 6,450
Option 3: INR 6,500
Option 4: INR 6,550
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Correct Answer: INR 6,500
Solution :
Let the principal amount be Rs. $P$
Compound Interest rate, $r$ = 20%
Time period, $T$ = 2 years
Now, the total amount after Compound Interest = Rs. 9360
So, $P(1+\frac{r}{100})^T$ = 9360
⇒ $P= \frac{9360}{(1+\frac{20}{100})^2}$
⇒ P = 6500
Hence, the correct answer is INR 6,500.
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