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

The correct answer is option 4: 1250

For compound interest:

$\text{CI} = P \left[ \left(1 + \frac{R}{100}\right)^n - 1 \right]$

Given:

• $\text{CI} = \text{₹}318$
• $\text{Rate} = 12\% \text{ per annum}$
• $\text{Time} = 2\text{ years}$

$318 = P \left[ (1.12)^2 - 1 \right]$

$318 = P(1.2544 - 1)$

$318 = P(0.2544)$

$P = \frac{318}{0.2544} = 1250$