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Find the principal that should be deposited in a bank so that the amount for 2 years is Rs.22050 at a rate of interest 5% compounded annually?
Given :
Amount A = Rs.22050
Rate of interest R = 5%
Time n = 2 years
To find :
We have to find the principal amount.
Solution :
Let the principal amount be P.
We know that,
Formula for amount when the interest is compounded annually is,
$A = P(1 + \frac{R}{100})^{n}$
Therefore,
$22050 = P(1 +\frac{ 5}{100})^{2}$
$22050 = P[\frac{100+5}{100}]^{2}$
$22050 = P(\frac{105}{100})^{2}$
$P = \frac{22050 \times 100 \times 100}{105\times105}$
$P = \frac{210\times100\times100}{1\times105}$
$P = 2\times100\times100$
P = 20000
The principal amount that should be deposited in the bank is Rs. 20000.
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