Exams › IBPS PO › General Awareness

The difference between compound interest and simple interest on a certain sum for 2 years at the rate of 25% is ₹25. Find the principal and the ratio of compound interest to simple interest.

1. 400, 9/8
2. 200, 9/8
3. 400, 11/10
4. 200, 11/10

Correct answer: 400, 9/8

Solution

For 2 years, the difference between compound interest and simple interest is \(P\left(\frac{R}{100}\right)^2\). Here, \(25 = P\left(\frac{25}{100}\right)^2 = P\cdot\frac{1}{16}\), so \(P=400\). Also, for 2 years at 25%, \(\text{CI} = 400(1.25)^2 - 400 = 225\) and \(\text{SI}=400\times 25\times 2/100=200\), so the ratio is \(225:200 = 9:8\).

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