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The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 4% per annum is Rs. 1. The sum (in Rs.) is:

a) 625
b) 630
c) 640
d) 650

Answer: a
Explanation:
$$\eqalign{ & {\text{Let}}\,{\text{the}}\,{\text{sum}}\,{\text{be}}\,Rs.\,x.\,{\text{Then}}, \cr & {\text{C}}{\text{.I}}{\text{.}} = {x{{\left( {1 + \frac{4}{{100}}} \right)}^2} – x} \cr & \,\,\,\,\,\,\,\,\,\,\,\,\,\, = {\frac{{676}}{{625}}x – x} \cr & \,\,\,\,\,\,\,\,\,\,\,\,\,\, = \frac{{51}}{{625}}x \cr & {\text{S}}{\text{.I}}{\text{.}} = {\frac{{x \times 4 \times 2}}{{100}}} \cr & \,\,\,\,\,\,\,\,\,\,\,\,\, = \frac{{2x}}{{25}} \cr & \therefore \frac{{51x}}{{625}} – \frac{{2x}}{{25}} = 1 \cr & x = 625 \cr} $$

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