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si and ci

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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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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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