The difference between the compound interest and the simple interest on a given principal is ₹1,725 in 2 years and the rate of interest in both cases is 25% per annum, and in the case when interest is compounded, it is compounded annually. Find the principal.
Answer & explanation
Correct answer: option 4
The formula used here is,
Difference in the simple interest and compound interest on a certain sum at R% per annum in 2 years = (CI - SI) = $\frac{PR^2}{100^2}$
⇒ Difference in the simple interest and compound interest on a certain sum at 25% per annum in 2 years = Rs. 1725
⇒ 1725 = $\frac{P25^2}{100^2}$
⇒ 1725 = P x \(\frac{1}{16}\)
⇒ P = 27600