Question : The difference between simple and compound Interest compounded annually on a certain sum of money for 2 years at 4% per annum is Rs. 8. The sum is:
Option 1: Rs. 10,000
Option 2: Rs. 20,000
Option 3: Rs. 5,000
Option 4: Rs. 15,000
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Correct Answer: Rs. 5,000
Solution :
Given: The difference between simple interest (SI) and compound interest (CI) compounded annually on a certain sum of money for 2 years at 4% per annum is Rs. 8.
Time = 2 years
Rate ($R$) = 4% per annum
Let the principal be Rs. $P$.
Formula Used:
The difference between CI and SI for the same sum and same rate for 2 years = $\frac{PR^2}{10000}$
⇒ $8 =P\times \frac{4^2}{10000}$
⇒ $P = 5000$
Hence, the correct answer is Rs. 5,000.
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