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A sum of money is borrowed and paid back in two annual installments of Rs. 882 each allowing 5% C.I. The sum borrowed was?

Correct answer: B. Rs. 1640

  • A. Rs. 1620
  • B. Rs. 1640
  • C. Rs. 1680
  • D. Rs. 1700

Explanation

Discount each annual repayment to its present value: Rs.882 ÷ 1.05 = Rs.840 for the first repayment and Rs.882 ÷ (1.05)^2 = Rs.800 for the second. The borrowed sum is therefore Rs.840 + Rs.800 = Rs.1,640. Students may choose Rs.1,620 by applying compound discount incorrectly or by rounding the discounted instalments.

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