Compound Interest

Yearly compound interest

Q. The simple interest on a certain sum of money for 3 years at the rate of 5% per annum is Rs.244 less than compound interest compounded yearly. Find out the sum.

Here:  Principle (P) = ?     Time(T)=3yrs 
          Rate(R)= 5%     C.I - S.I = Rs.244

We know that,  
      C.I = P [(1+R/100) T - 1] 

              = P[ 1+5/100) 3-1]

              = P [(1.05) 3 -1]

              = 0.157625P

Again,   S.I.= PTR/100

                    = (P*3*5)/100

                    = 0.15P

We have,    C.I - S.I= Rs. 244

               0.157625P - 0.15P = Rs.244

               0.007625P = Rs. 244

                   P = Rs. 3200

Therefore, the required sum of money is Rs. 3200.