Mathematics of FinanceMCQMTP June 22Question 1357 of 512
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The difference between simple interest and compound interest on a certain for 2\displaystyle 2 years at 10%\displaystyle 10\% p.a is 10\displaystyle 10. Find the sum.

Options

A1000\displaystyle 1000
B3095\displaystyle 3095
C100\displaystyle 100
D990\displaystyle 990
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Correct Answer

Option a1000\displaystyle 1000

All Options:

  • A1000\displaystyle 1000
  • B3095\displaystyle 3095
  • C100\displaystyle 100
  • D990\displaystyle 990

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Detailed Solution & Explanation

**Derivation of Principal Sum** Given: - Time (t\displaystyle t) = 2\displaystyle 2 years - Rate of Interest (r\displaystyle r) = 10%\displaystyle 10\% per annum - Difference between Compound Interest and Simple Interest (CISI\displaystyle CI - SI) = Rs. 10\displaystyle \text{Rs. }10 **Step 1: Use the difference formula for 2 years** Difference=P(r100)2\text{Difference} = P \left(\frac{r}{100}\right)^2 10=P(10100)210 = P \left(\frac{10}{100}\right)^2 10=P(0.10)210 = P (0.10)^2 10=0.01P10 = 0.01 P **Step 2: Solve for P\displaystyle P** P=100.01=Rs. 1,000P = \frac{10}{0.01} = \text{Rs. }1,000 *(Note: The database lists Option C (100\displaystyle 100) as correct, which is a typo in the key. The mathematically correct principal is 1,000, which is Option A.)* Hence, **Option A** 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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Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

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