Multiple choice

The compound interest on a certain sum at 2.5\% p.a. for 2 years is Rs. 81. Find the sum.

  1. Rs. 1000

  2. Rs. 1200

  3. Rs. 1500

  4. Rs. 1600
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D Correct answer
Explanation

Using the compound interest formula: CI = P[(1 + r/100)ⁿ - 1]. Here, CI = 81, r = 2.5%, n = 2 years. So: 81 = P[(1 + 2.5/100)² - 1] = P[(1.025)² - 1] = P[1.050625 - 1] = P × 0.050625. Therefore: P = 81/0.050625 = 1600. The principal sum is Rs. 1600. This is a straightforward application of the CI formula - solve for P by dividing the compound interest by the interest factor.

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