Question : If the difference between the compound interest and simple interest at 17% on a sum of money for 2 years (compounded annually) is INR 433.50, then the sum (in INR) is:
Option 1: 15,000
Option 2: 25,000
Option 3: 20,000
Option 4: 12,000
Correct Answer: 15,000
Solution :
Difference between Compound Interest and Simple Interest for 2 years = $\frac{PR^{2}}{100^{2}}$ where $R$ is the rate of interest per annum compounded annually and $P$ is principal.
⇒ 433.50 = $P × \frac{17}{100}$ × $\frac{17}{100}$
⇒ 43350 × 100 = $P$ × 289
⇒ $P$ = $\frac{4335000}{289}$ = INR 15,000
Hence, the correct answer is 15,000.
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