The difference between simple and compound interests compounded annually on a certain sum of money for 3 years at 5% per annum is Rs. 40. The sum s:
Question
The difference between simple and compound interests compounded annually on a certain sum of money for 3 years at 5% per annum is Rs. 40. The sum s:
Solution
The difference between compound interest and simple interest for 3 years is given by the formula:
P*(R/100)^2
Where: P is the principal amount (the sum of money that we need to find) R is the rate of interest
Given in the problem: R = 5% per annum The difference between compound interest and simple interest = Rs. 40
Substituting these values into the formula, we get:
40 = P*(5/100)^2
Solving this equation for P gives us the sum of money.
First, simplify the right side of the equation:
40 = P*(0.05)^2 40 = P*0.0025
Then, solve for P:
P = 40 / 0.0025 P = Rs. 16000
So, the sum of money is Rs. 16000.
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