Multiple choice

The difference between the compound interest and simple interest of a certain sum of amount is rupees 256.40 for 4 years at 10% rate per annum. Find the sum of money?

  1. 4000

  2. 4500

  3. 40000

  4. 6000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for the difference between compound interest and simple interest for n years is CI - SI = P[(1 + r)^n - 1 - nr]. For 4 years at 10%: (1.1)^4 = 1.4641, so CI - SI = P[1.4641 - 1 - 0.4] = P(0.0641). Given CI - SI = 256.40, we have P = 256.40 / 0.0641 = 4000. Option A (4000) is correct. Option B (4500) is close but incorrect. Option C (40000) is ten times the correct value.

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