Question

What principal will amount to Rs.15729 in two years, if the rate of interest for successive years are 5% and 7% respectively, the interest is being compounded annually.

Answer 1

Given : Amount = Rs.15729, n = 2 years, r₁ = 5 and r₂ = 7%

A = `"P"(1 + "r"_1/100)(1 + "r"_2/100)`

⇒ 15729 = `"P"(1 + 5/100)(1 + 7/100)`

⇒ 15729 = `"P"(105/100)(107/100)`

⇒ P = `(15729 xx 100 xx 100)/(105 xx 107)`

⇒ P = Rs.14000.