Read Mode
Compound Interest
A sum of money is borrowed and paid back in two annual installments of Rs. 882 each, allowing 5% compound interest. What was the sum borrowed?
Explanation and memory cue
The sum borrowed is the present value of two installments of Rs. 882 each, discounted at 5% compound interest. Calculating the present value: PV = 882/(1.05) + 882/(1.05)^2 = 840 + 800 = Rs. 1640 approximately. This matches option B, making it the correct answer. The original explanation incorrectly stated Rs. 1620 as the exact value, but the correct calculation and verified sources confirm Rs. 1640 as the sum borrowed.