Mathematics of FinanceMCQMTP June 24 Series IQuestion 1185 of 512
All Questions

If the difference between the compound interest compounded annually and simple interest on a certain amount at 10%\displaystyle 10\% per annum for two years is 372\displaystyle 372, then the principal amount is.

Options

A37,000\displaystyle 37,000
B37,200\displaystyle 37,200
C37,500\displaystyle 37,500
DNone of these
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Correct Answer

Option b37,200\displaystyle 37,200

All Options:

  • A37,000\displaystyle 37,000
  • B37,200\displaystyle 37,200
  • C37,500\displaystyle 37,500
  • DNone of these

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Detailed Solution & Explanation

Let the principal be P\displaystyle P. The rate of interest is r=10%\displaystyle r = 10\% p.a., so i=10100=0.10\displaystyle i = \frac{10}{100} = 0.10. The time period is t=2\displaystyle t = 2 years. The formula for the difference between Compound Interest (CI\displaystyle CI) and Simple Interest (SI\displaystyle SI) for a 2\displaystyle 2-year period is: CISI=P×i2CI - SI = P \times i^2 Given that the difference is Rs. 372\displaystyle \text{Rs. }372: 372=P×(0.10)2372 = P \times (0.10)^2 372=P×0.01372 = P \times 0.01 Solving for P\displaystyle P: P=3720.01=37,200P = \frac{372}{0.01} = 37,200 Thus, the principal amount is Rs. 37,200\displaystyle \text{Rs. }37,200. Hence, **Option B** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

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