Question

Mr. X invested an amount for 2 years at 15 percent per annum at simple interest. Had the
interest been compounded annually, he would have earned Rs. 450/- more as interest. What
was the amount invested?

Answer 1

Let Principal be P.

Rate is R=15%=0.15

Time is T=2 years

Using simple interest formula,

SI=P x R x T

SI=P x 0.15 x 2

SI=0.3P

Using compound interest formula,

CI=P(1+r)^t-P

CI=P(1+0.15)^2-P

CI=P(1.15)^2-P

CI=1.3225P-P

CI=0.3225P

He earned in interest is Rs.450.

Total Interest is I=SI+CI

I=CI-SI

450=0.3225P-0.3P

450=0.0225P

P={450} / {0.0225}

P=20,000

Therefore, the amount invested is Rs 20000.