The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 4% per annum is Re. 1. The sum (in Rs.) is:
papay dey Answered question February 15, 2025
Let’s denote the principal amount as P.
Simple Interest (SI) for 2 years at 4% per annum:
SI = (P × R × Time) / 100
= (P × 4 × 2) / 100
= (P × 8) / 100
= 0.08P
Compound Interest (CI) for 2 years at 4% per annum, compounded annually:
CI = P × (1 + R/100)^Time – P
= P × (1 + 4/100)^2 – P
= P × (1.04)^2 – P
= 1.0816P – P
= 0.0816P
Given that the difference between CI and SI is Re. 1:
CI – SI = 1
0.0816P – 0.08P = 1
Simplify the equation:
0.0016P = 1
Divide both sides by 0.0016:
P = 1 / 0.0016
P = 625
The sum is Rs. 625.
papay dey Answered question February 15, 2025
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