On a certain sum of money the compound interest of Rs. 318 is earned in 2 years. If the rate of interest is 12%, what is the principal amount in rupees?

1250

Formulae for net effect: (x + y + \(\frac{xy }{100 }\)) % is used when compounding of the amount is done.

The rate of interest is 12% for a year, the compound interest earned at the end of 2nd year will be:

(12 + 12 + \(\frac{\text{12x12} }{100 }\))% = (24 + \(\frac{\text{144}}{100 }\))% = 24 + 1.44% = 25.44%

Therefore, 132 is the value of 25.44% then

Principal amount = \(\frac{132 }{\text{25.44%}}\) x 100% = 1250