A person invests a certain sum of money at 8% simple interest and the same sum at 10%...
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A person invests a certain sum of money at 8% simple interest and the same sum at 10% compound interest compounded annually. He finds that the difference between the interests at the end of 2 years is Rs. 120. The sum is:
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Answer: A. Rs. 12,000
For a 10% interest rate, the difference between compound and simple interest over 2 years is P*(r/100)^2 = 0.01P. Equating 0.01P = 120 yields P = Rs. 12,000.
Step-by-step Derivation:
Step 1: Formula for 2-year CI - SI difference at 10%: Difference = P * (R / 100)^2.
Step 2: 120 = P * (10 / 100)^2 = P * 0.01.
Step 3: P = 120 / 0.01 = Rs. 12,000.