The difference between the compound interest and simple interest on a sum of money for 1.5 years at 12% per annum is 150 rs. Calculate the amount.
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The difference of 150 is solely due to interest on interest in the second year. This represents 12% simple interest on interest received for first year for 6 months (or 6% in effect).
Therefore, interest for the first year is :
150/6 x 100 = 2500
Now, 2500 must be 12% of the principal amount at the beginning of first year.
Therefore, principal at the beginning of first year is :
P = 2500/12 x 100 = 20833.33
This method is adopted to crack management entrance examinations where time is at premium and application of traditional formulae consumes more time than you can afford to spend. A second look reveal both steps could be combined together and the answer pops into your mind without much ado …
{(150/6 x 100)/12} x 100 = 20833.33
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anshaj0001:
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here is your answer
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