Discussion of Question with ID = 005 under Compound-Interest

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Question

The difference in compound interest(annual compounding) and simple interest for a period of 2 years is Rs. 343. What is the principal amount if the rate is 7% p.a.?

A

Rs. 70000.

B

Rs. 80000.

C

Rs. 60000.

D

Rs. 90000.

Soln.
Ans: a

The shortcut formula for the difference between compound and simple interest over a period of 2 years is $Difference = Principal × (\text"rate"/100)^2$. So Principal = $(Difference × 10000)/(rate × rate)$ = $(343 × 10000)/(7 × 7)$ = Rs. 70000.


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