The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 2% per annum is rs. 100. The sum is:
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Answer:
The sum is Rs 250,000
Explanation:
Let the sum be P
The formula of Compound Interest( CI) is:
CI = [P ( 1 + r /100) ² - P]
= [P ( 1 + 2 /100) ² - P]
= [P ( 1.02) ² - P]
= 1.0404 P - P
= 0.0404 P
The formula of Simple Interest (SI) is:
SI = P × R × T / 100
= P × 2× 2 / 100
= 4 P / 100
= 0.04 P
Difference = CI - SI
Rs 100 = 0.0404 P - 0.04 P
Rs 100 = 0.0004 P
P = 100 / 0.0004
P = Rs 250,000
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