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Interest at 20% p.a. compounded annually for 2 years is ₹4,600 more than interest at 20% p.a. compounded half-yearly for 1 year. Find the principal.

1. ₹20,000
2. ₹32,000
3. ₹50,000
4. ₹47,000

Correct answer: ₹20,000

Solution

Annual CI for 2y: P(1.2²-1)=0.44P. Half-yearly CI for 1y (10% per half): P(1.1²-1)=0.21P. Difference: 0.44P-0.21P=0.23P=4600. P=₹20,000.

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