Q. If the difference between compound interest and simple interest on a sum of money in 2 years at 10% annual interest rate is 12, then find the amount.

Correct Answer: (A) ₹1200

Explanation:

To determine the principal amount based on the difference between compound interest (CI) and simple interest (SI) over 2 years at an annual interest rate of 10%, follow these steps:

1. Calculate Simple Interest (SI):
SI = P × Rate × Time = P × 10% × 2 = 0.2P

2. Calculate Compound Interest (CI):
CI = P × (1 + Rate)^2 – P = P × (1.1)^2 – P = P × 1.21 – P = 0.21P

3. Find the Difference Between CI and SI:
Difference = CI – SI = 0.21P – 0.2P = 0.01P

Given that the difference is ₹12:
0.01P = 12 ⇒ P = 12 / 0.01 = 1200

Answer: ₹1200 Option (A)