If at same rate of interest, in 2 years, the simple interest is ₹40 and compound interest is ₹45, then what is the principal (in ₹)?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. 80.
SI for 2 years = ₹40
CI for 2 years = ₹45
Difference = ₹5 (which is interest on 1st year's interest)
In compound interest,
Difference = Interest on 1st year's interest = (SI for 1 year × Rate) / 100
Let SI for 1 year = 40 ÷ 2 = ₹20
So,
5 = (20 × R) / 100
⇒ R = 25%
Now use SI formula:
SI = (P × R × T) / 100
40 = (P × 25 × 2) / 100
⇒ 40 = (50P) / 100
⇒ P = (40 × 100) / 50 = ₹80