If the difference between the compound interest and simple interest on a sum of
Practice Questions
Q1
If the difference between the compound interest and simple interest on a sum of money for 2 years at 10% per annum is $50, what is the principal? (2000)
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$2000
Questions & Step-by-Step Solutions
If the difference between the compound interest and simple interest on a sum of money for 2 years at 10% per annum is $50, what is the principal? (2000)
Step 1: Understand the problem. We need to find the principal amount (P) where the difference between compound interest (CI) and simple interest (SI) for 2 years at a rate of 10% is $50.
Step 2: Recall the formula for the difference between CI and SI for 2 years: Difference = P * r^2 / 10000, where r is the rate of interest.
Step 3: Substitute the values into the formula. Here, r = 10, so we have: Difference = P * (10^2) / 10000.
Step 4: Simplify the formula: Difference = P * 100 / 10000 = P / 100.
Step 5: Set the difference equal to $50: P / 100 = 50.
Step 6: Solve for P by multiplying both sides by 100: P = 50 * 100.
Step 7: Calculate P: P = 5000.
Compound Interest vs. Simple Interest – Understanding the difference between compound interest and simple interest, particularly how they accumulate over time.
Formula Application – Applying the formula for the difference between compound interest and simple interest over a specified period.
Percentage Calculations – Calculating interest rates and understanding their impact on principal amounts.
