What sum will amount to ₹ 2782.50 in 2 years at compound interest, if the rates are 5% and 6% for the successive years?
Solution:
It is given that
Amount (A) = ₹ 2782.50
Rate of interest for two successive years = 5% and 6%
We know that
A = P (1 + r/100)n
Substituting the values
2782.50 = P (1 + 5/100) (1 + 6/100)
By further calculation
2782.50 = P × 21/20 × 53/50
So we get
P = 2782.50 × 20/21 × 50/53
Multiply and divide by 100
P = 278250/100 × 20/21 × 50/53
P = ₹ 2500
Hence, the principal is ₹ 2500.
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