Question : The difference between compound interest and simple interest on a sum at 20% per annum for two years is Rs. 420. Find the sum (in Rs.).
Option 1: Rs. 8,000
Option 2: Rs. 10,500
Option 3: Rs. 9,000
Option 4: Rs. 11,000
Correct Answer: Rs. 10,500
Solution :
Given: The difference between compound interest and simple interest on a sum at 20% per annum for two years is Rs. 420.
The difference between compound interest (CI) and simple interest (SI) for 2 years is $\frac{P\times r^2}{(100)^2}$ where $P$ and $r$ are the principal and rate of interest respectively.
According to the question,
⇒ $420 =\frac{P\times (20)^2}{(100)^2}$
⇒ $P=\frac{100\times 100\times 420}{20\times 20}=$ Rs. 10,500
Hence, the correct answer is Rs. 10,500.
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