Multiple choice

A man borrowed some money and agreed to pay-off by paying Rs. 3150 at the end of the 1st year and Rs. 4410 at the end of the 2nd year. If the rate of compound interest is 5% per annum, then the sum is

  1. Rs. 5000

  2. Rs. 6500

  3. Rs. 7000

  4. Rs. 9200
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let the sum be P. The present value of the payments is P = 3150 / (1.05) + 4410 / (1.05)^2. P = 3000 + 4410 / 1.1025 = 3000 + 4000 = 7000.

AI explanation

The present value of the first payment is 3150 divided by 1.05, which equals 3000. The present value of the second payment is 4410 divided by 1.05 squared, which equals 4000. Adding these present values together gives the initial sum of Rs. 7000.

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