A certain sum was invested at the rate of 10% for a period of 2 years at compound interest and compounded annually. The same sum was invested for the same period and same rate of interest at simple interest. If the difference of compound interest and simple interest was 200, find the sum.
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. 20,000.
Given that
Rate = 10%
Time = 2 years
C.I - S.I. = 200
Formula used
S.I. = (P × R × T)/100, where P = Principal, R = Rate of Interest in % per annum, and T = Time
For 2 years, C.I. - S.I. = P (R/100)2
According to the question
200 = P (10/100)2
P = 200 × 100
P = 20000