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A sum of money is paid back in two annual installments of Rs.17,640 each, allowing 5% compound interest compounded annually. The sum borrowed was
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Explanation:
Suppose the principals for two years are P1 and P2
After 1st year,
⇒ 17640 = P1 × [1 + 5/100]
⇒ P1 = 17640 × 20/21 = 16800
After 2nd year,
⇒ 17640 = P2 × [1 + 5/100]2
⇒ P2 = 17640 × 400/441 = 16000
∴ Total sum borrowed = 16800 + 16000 = Rs. 32800