Q. The difference between the compound interest and the simple interest on a certain principal for 2years at 4% per annum is Rs 250. Find the principal amount.
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Answer:
Let SM denotes the required sum of money.
Hence from above data we get following relation,
SM*(1 + 4/100)^2 - SM - SM*2*4/100 = 20
or SM*[(26/25)^2 - 1 - 2/25] = 20
or SM*[(26/25)^2 - 27/25] = 20
or SM*(1/625) = 20
or SM = 20*625 = 12,500
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