Question:medium

The difference between Compound Interest (compounded annually) and Simple Interest on a certain sum of money at \(10\%\) per annum for \(3\) years is ₹155. Find the principal sum.

Show Hint

For 3 years, \[ \text{CI}-\text{SI} = P\left(\frac{r}{100}\right)^2 \left(3+\frac{r}{100}\right). \] This shortcut saves a lot of calculation.
Updated On: Jun 8, 2026
  • ₹4000
  • ₹5000
  • ₹6000
  • ₹5500
Show Solution

The Correct Option is B

Solution and Explanation

Step 1: Understand the idea.
Simple Interest stays the same each year, but Compound Interest grows because you earn interest on past interest. So Compound Interest is always a little more than Simple Interest, and we want that small difference.

Step 2: Use the 3-year difference formula.
For $3$ years, the gap between Compound Interest and Simple Interest is \[ \text{CI}-\text{SI}=P\left(\frac{r}{100}\right)^2\left(3+\frac{r}{100}\right), \] where $P$ is the principal and $r$ is the yearly rate.

Step 3: Put in the given values.
Here $r=10$ and the difference is $155$. So \[ 155=P\left(\frac{10}{100}\right)^2\left(3+\frac{10}{100}\right). \]
Step 4: Simplify the bracket terms.
Note $\frac{10}{100}=\frac{1}{10}$, so $\left(\frac{1}{10}\right)^2=\frac{1}{100}$, and $3+\frac{1}{10}=\frac{31}{10}$. Then \[ 155=P\times\frac{1}{100}\times\frac{31}{10}=P\times\frac{31}{1000}. \]
Step 5: Solve for the principal $P$.
Multiply both sides by $\frac{1000}{31}$: \[ P=155\times\frac{1000}{31}. \] Since $155=31\times5$, this gives \[ P=5\times1000=5000. \]
Step 6: State the answer.
The principal sum is rupees $5000$. \[ \boxed{\text{Rs }5000} \]
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