What is the principal amount which earns Rs. 464 as compound interest for the second year at 16% per annum?
1. Rs. 3200
2. Rs. 2800
3. Rs. 2700
4. Rs. 2500
1. Rs. 3200
2. Rs. 2800
3. Rs. 2700
4. Rs. 2500
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Correct Answer – Option 4 : Rs. 2500
Given:
Compound interest for the second year = Rs. 464
Rate (R) = 16%
Formula used:
A = P(1 + R/100)n
Where A → amount
P → principal
R → rate
n → time
Calculations:
Let the principal be Rs. P.
According to the question,
Amount after 1st year = P × 29/25 = 29P/25
Amount after 2nd year = (29P/25) × (29/25) = (841P/625)
So, Compound interest for the second year = (841P/625) – 29P/25
⇒ (841P – 725P)/625
⇒ 116P/625
But Compound interest for the second year = Rs. 464
Thus (116P/625) = 464
⇒ P = 2500
∴ The Principal is Rs. 2500.