Discussion

The difference between the compound interest compounded annually and simple interest for 2 years at 20% per annum is Rs.144. Find the principal?

Answer: C

Over two years the gap between compound and simple interest is

\[ \text{CI} - \text{SI} = P\left(\frac{R}{100}\right)^{2} \]

\[ 144 = P(0.20)^{2} = 0.04P \]

\[ P = \frac{144}{0.04} = \text{Rs. } 3600 \]

Checking: SI = Rs. 1440 and CI = \( 3600(1.44 - 1) = 1584 \), differing by Rs. 144 - which is 20% of the first year's Rs. 720.

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