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The difference between the compound interest and simple interest on a certain sum of 10% per annum for 2 years is Rs. 874. Find the sum
1. Rs. 43,700
2. Rs. 17,480
3. Rs. 87,400
4. Rs. 43,450

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Correct Answer - Option 3 : Rs. 87,400

Formula Used :

For compound interest

A = P(1 + R/100)n

where P → Principal Amount

A → Final Amount 

R→ Interest rate

n → Time Period

Compound Interest (CI) = A – P

⇒ CI = P(1 + R/100)– P

 

For simple interest 

SI = (P × R × T)/100

where P → Principal Amount

SI → Simple Interest

R→ Interest rate

T → Time Period

∴ According to question,

P(1 + 10/100)2 – P – (P × 10 × 2)/100 = 874

⇒ 1..21P – P – 0.20P = 874

⇒ 0.01P = 874 or P = 87400

∴ The sum is Rs.87,400

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