Multiple choice

The difference between simple interest and compound interest, compounded annually, on a certain sum of money for 2 years at 9% per annum is Rs. 405. The sum is ______.

  1. Rs. 50,000

  2. Rs. 1,00,000

  3. Rs. 2,00,000

  4. Rs. 1,50,000
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A Correct answer
Explanation

For 2 years, the difference between CI and SI is P * (r/100)^2. Given 405 = P * (9/100)^2, P = 405 / (81/10000) = 405 * 10000 / 81 = 5 * 10000 = 50,000.

AI explanation

Using the formula for the difference between compound interest and simple interest for two years, the difference equals the principal multiplied by the square of the rate divided by 10000. Substituting the given values, 405 equals the principal multiplied by 81 divided by 10000. Solving this equation shows the principal is 50000.

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