Question

The difference between the interest earned under compound interest, interest being compounded annually and simple interest for two years on the same sum and at the same rate of interest is 25.60. Find the sum if the rate of interest is 8% p.a

• A. 2000
• B. 2500
• C. 3200
• D. 4000

Answer 1

The correct option is D 4000

Simple Interest $SI=\frac{PNR}{100}$
So, $SI=\frac{P\times 2\times 8}{100}=Rs0.16P$
When interest is compounded, Amount $A=P(1+\frac{R}{100}{)}^n$
So, A $=P\times (1+\frac{8}{100}{)}^2=Rs1.1664P$
And $CI=A-P=0.1664P$
Si, difference $CI-SI=Rs0.1664P-Rs0.16P=Rs25.60$
$=>0.0064P=25.60$
$=>P=Rs4000$