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A sum of money amounts to $1200 in 2 years at compound interest. If the rate of

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Question: A sum of money amounts to $1200 in 2 years at compound interest. If the rate of interest is 10% per annum, what was the principal?

Options:

  1. $1000
  2. $900
  3. $1100
  4. $950

Correct Answer: $1000

Solution: 

Let P be the principal. 1200 = P(1 + 0.10)^2 => P = 1200 / 1.21 = $991.74

A sum of money amounts to $1200 in 2 years at compound interest. If the rate of

Practice Questions

Q1
A sum of money amounts to $1200 in 2 years at compound interest. If the rate of interest is 10% per annum, what was the principal?
  1. $1000
  2. $900
  3. $1100
  4. $950

Questions & Step-by-Step Solutions

A sum of money amounts to $1200 in 2 years at compound interest. If the rate of interest is 10% per annum, what was the principal?
  • Compound Interest – Understanding how compound interest works and how to calculate the principal amount given the final amount, interest rate, and time.
  • Mathematical Manipulation – Ability to rearrange and solve equations to isolate the principal in the context of compound interest.
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