Multiple choice

A loan was repaid in two annual instalments of Rs. 3630 each. If the rate of interest be 10% per annum compounded annually, then find the sum that was borrowed.

  1. Rs. 5200

  2. Rs. 6100

  3. Rs. 6300

  4. Rs. 5600
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C Correct answer
Explanation

Let the sum be P. The present value of the two installments is P = 3630 / (1.1) + 3630 / (1.1)^2 = 3300 + 3000 = 6300.

AI explanation

The present value of the first installment is 3630 / (1 + 10/100)^1, which equals Rs. 3300. The present value of the second installment is 3630 / (1 + 10/100)^2, calculating to 3630 / 1.21 which equals Rs. 3000. The total sum borrowed is the sum of these present values, 3300 + 3000, which results in Rs. 6300.

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