Question : What is the present value of the sum if the interest compounded at the rate of 18% per annum for two years is 981?
Option 1: INR 2,800
Option 2: INR 2,500
Option 3: INR 3,600
Option 4: INR 2,400
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Correct Answer: INR 2,500
Solution : Given: Compound interest = 981 $r=18$% $t=2$ years Solve by using the formula: Compound interest = $P[(1+\frac{r}{100})^{t}–1]$ to get the desired value where $P$ is principal, $r$ is the rate of interest and $t$ is the time in years. Putting the value in the above formula, we have, ⇒ $981=P[(1+\frac{18}{100})^{2}-1]$ ⇒ $981=P[(\frac{59}{50})^{2}-1]$ ⇒ $981=P[\frac{3481–2500}{2500}]$ ⇒ $981=P[\frac{981}{2500}]$ ⇒ $P=2500$ Hence, the correct answer is INR 2,500.
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