The difference between the compound interest (compounded annually) and simple interest on a certain principal sum for 3 years at 10% per annum is Rs. 155. What is the principal sum?

Answer and explanation

Correct answer: D. Rs. 5000

  1. Step 1: Formula for 3-year difference: Difference = P (r/100)^2 (3 + r/100).
  2. Step 2: Here r = 10%, so r/100 = 0.1.
  3. Step 3: 155 = P (0.01) (3 + 0.1) = P 0.01 3.1 = P * 0.031.
  4. Step 4: P = 155 / 0.031 = 155000 / 31 = Rs. 5000.

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