si and ci

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rupsk: Master | Next Rank: 500 Posts; Posts: 123; Joined: Mon Feb 07, 2011 12:11 pmFollowed by: 1 member

by rupsk » Thu Aug 18, 2011 3:04 am

The difference between the compound interest compounded annually and simple interest for 2 years at 20% per annum is $144. find the principal

A. $3900
B. $3000
C. $3300
D. $3600
E. $3400

please explain concept of difference between CI and SI for 2 years and 3 years. Thanks

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Source: Beat The GMAT — Problem Solving | Thu Aug 18, 2011 3:04 am

force5: Legendary Member; Posts: 582; Joined: Tue Mar 08, 2011 12:48 amFollowed by: 6 members; Thanked: 61 times; GMAT Score:740

by force5 » Thu Aug 18, 2011 10:13 am

The answer to the question is D

Compound interest = x(1.2)^2-x ( x is the principal)
= 0.44x
SI = 0.4x
difference = 0.04x = 144 (gvn)
hence x = $3600

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