What principal on compound interest has their amount Rs. 650 in one year and Rs. 676 in two years?
1. Rs. 520
2. Rs. 572
3. Rs. 600
4. Rs. 625
1. Rs. 520
2. Rs. 572
3. Rs. 600
4. Rs. 625
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Correct Answer – Option 4 : Rs. 625
Given:
Amount in one year = 650
Amount in two years = 676
Concept used:
Amount = P(1 + R/100)T
Calculation:
Let the principal be x.
For one year,
⇒ x(1 + R/100)1 = 650 —-(1)
For two years,
⇒ x(1 + R/100)2 = 676 —-(2)
Dividing equation (2) and (1),
[x(1 + R/100)2]/[x(1 + R/100)1] = 676/650
⇒ (1 + R/100) = 26/25
From equation (1),
⇒ x(26/25) = 650
⇒ x = (650 × 25)/26
⇒ x = 25 × 25
⇒ x = 625
∴ The principle is Rs. 625.