The difference between the simple interest and compound interest on a principal at the rate 5% per annum for 2 years is ₹25. What is the principal?
Answer & explanation
Correct answer: option 1
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 5% per annum in 2 years = Rs. 25
⇒ 25 = $\frac{P5^2}{100^2}$
⇒ 25 = P x \(\frac{1}{400}\)
⇒ P = 10000