Multiple choice

If the compound interest of an amount, at the rate of $5\%$ per annum, for two years is Rs. $123.00,$ then the principal is

  1. Rs. $1000$
  2. Rs. $1100$
  3. Rs.$1200$
  4. Rs.$1300$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

CI = P * ((1 + r/100)^n - 1). 123 = P * ((1.05)^2 - 1) = P * (1.1025 - 1) = P * 0.1025. P = 123 / 0.1025 = 1200.

AI explanation

For a period of two years, the difference between compound interest and simple interest equals P * (R / 100)^2. Since the compound interest is 123 and the simple interest would be P * (5 * 2) / 100, we can solve by equating the compound interest formula CI = P * [(1 + R/100)^2 - 1] to 123. This gives P * (441/400 - 1) = 123, meaning P * (41/400) = 123. Solving for P gives a principal of Rs. 1200.

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