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The difference between the compound interest and the simple interest on a certain sum at 5 % per annum for 2 years is Rs. 1.50. The sum is_______?

Correct answer: A. Rs.600

  • A. Rs.600
  • B. Rs.500
  • C. Rs.400
  • D. Rs.300

Explanation

For 2 years, the difference between compound interest and simple interest is P(r/100)^2. Therefore, Rs.1.50 = P x (5/100)^2 = P x 0.0025, so P = Rs.1.50 ÷ 0.0025 = Rs.600. The likely wrong choice is Rs.500, usually caused by using 5% only once instead of squaring the annual rate.

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