The difference between the compound interest (compounded annually) and the simple interest on a certain sum of money at 12\% per annum for 2 years is 72. What is the principal amount?
- A. 6,500
- B. 6,000
- C. 5,500
- D. 5,000 ✓
Correct Answer: D. 5,000
Explanation
The difference between CI and SI for 2 years is given by D = \frac{PR^2}{100^2}. Thus, 72 = \frac{P \times 12^2}{10000} \implies P = \frac{72 \times 10000}{144} = 5000.
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