A certain amount of money is borrowed and repaid in two equal yearly installments of Rs. 882 each with a compound interest rate of 5%. What was the original amount borrowed?

Explanation

To find the principal, calculate the present value of both installments. The first installment of Rs. 882 is due after 1 year, and the second after 2 years. Using the formula for present value with 5% compound interest: Principal = 882 / (1 + 0.05) + 882 / (1 + 0.05)^2 = (882 × 20/21) + (882 × 400/441) = Rs. 1640.