If the difference between the compound interest and simple interest on a certain sum of money for three years at 10% p.a. is Rs.558, then the sum is:
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e Rs.18,000
| Understanding | Application |
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The compound interest over a period of time t = P(1 + r / 100)3 - P The simple interest over a period of time t = (P × r × t) / 100 |
The difference of interest for 3 years would be = P(1 + r/100)3 - P - (P × r × t)/100 ⇒ P{(1 + r / 100)3 - 1 - 3r / 100} ⇒ P{r3 / 106 + 3r2/104} From the given data ⇒ 558 = P{103/106 + 3 × 102/104} ⇒ P = 558/0.031 ⇒ P = Rs.18000 |