Q:
The difference between Simple Interest and Compound Interest at the rate of 12% on the same amount for 3 years is Rs. 112.32. What is the principal amount if interest is compounded annually?
Answer & Explanation
Answer: B) Rs. 2500
Explanation: Let the principal amount be Rs. x
Calculating SI:
SI for 1 year at 12% rate is Rs (12/100)*x. For 3 years it will be Rs (36/100)*x ------ (1)
Calculating CI:
For 1st year, Interest = (12/100)*x
For 2nd year, interest = (12/100)*x + (12/100)*x + (144/10000)*x
For 3rd year, interest = (12/100)*x + (12/100)*x + (12/100)*x + (144/10000)*x + (144/10000)*x + (1728/1000000)*x. ------ (2)
Subtracting equation 2 and 1 and solving further,
312*144*x/1000000 = 112.32
X = Rs 2500.
Alternative way: Using formula for Difference
between CI and SI for 3 years
we can also use the above formula to find the value of P.
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