Question 18

The simple interest on a certain sum of money invested at a certain rate for 2 years amounts to Rs. 1200 The compound interest on the same sum of money invested at the same rate of interest for 2 years amounts to Rs. 1290. What was the principal?

Solution

Let principal be P and rate of interest be r.

Simple interest for 2 years = 1200

Simple interest for 1 year = 600

Difference in compound interest and simple interest = 90 , which is interest earned on the interest of first year.

$$\frac{600 \times r}{100} = 90 $$ => r= 15

$$\frac{P \times 15}{100} = 600$$ =>P = 4000

So, the answer would be option d)Rs. 4000

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