Multiple choice

The difference between simple and compound interest on a certain sum of money at 5% p.a. for 2 years is Rs. 160. Find the sum.

  1. Rs. 64,000

  2. Rs. 60,000

  3. Rs. 40,000

  4. Rs. 48,000
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A Correct answer
Explanation

For 2 years, the difference between compound interest and simple interest is P * (r/100)^2. Given 160 = P * (5/100)^2, 160 = P * (1/20)^2 = P / 400. P = 160 * 400 = 64,000.

AI explanation

Using the formula for the difference between simple interest and compound interest for two years, the difference equals the principal multiplied by the square of the rate, divided by 10000. Plugging in the given values, 160 equals P multiplied by 5 squared, divided by 10000. This simplifies to 160 equals P multiplied by 25, divided by 10000. Solving for P gives P equals 160 times 10000, divided by 25, which results in Rs. 64,000.

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