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The difference between the compound interest compounded annually and simple interest for 2 years at 20% per annum is Rs.144. Find the principal?

Correct answer: C. Rs.3600

  • A. Rs.3000
  • B. Rs.3300
  • C. Rs.3600
  • D. Rs.3900

Explanation

For 2 years, the difference between compound interest and simple interest is P x r². Therefore Rs.144 = P x (0.20)² = 0.04P, so P = Rs.144/0.04 = Rs.3600. Students may choose Rs.3000 by using a wrong interest difference formula or treating the rate as 4%.

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