Find the principal if compound interest is charged at the rate of 16⅔% per…

Concept

For annual compound interest, each year multiplies the current amount by the growth factor (1 + r/100).

After n years, the amount is A = P(1 + r/100)n, where P is the principal and r is the annual percentage rate.

Application

1. Convert the rate: 16⅔% = 1/6, so the annual growth factor is 1 + 1/6 = 7/6.

2. For two years, 196 = P × (7/6)2 = P × 49/36.

3. Therefore, P = 196 × 36/49 = 4 × 36 = ₹144.

Cross-check

1. Starting with ₹144, the first-year amount is ₹144 × 7/6 = ₹168.

2. The second-year amount is ₹168 × 7/6 = ₹196, which matches the stated amount.

Thus, the principal is ₹144.