# Find the principle

The difference between the compound interest and the simple interest on a certain sum of money at 12% per annum for 2 years is Rs. 1800. Find the principle sum when the interest is compounded annually:

- Rs.120000
- Rs. 125000
- Rs. 128000
- None of these

**Answer: (2) Rs. 125000**

**Explanation:-**

Let the sum be Rs. X

According to question,

{X (1 + 12/100)^2 – X} – 12 x 2 x X/100 = 1800

{X (1 + 3/25)^2 – X} – 3 x 2 x X/25 = 1800

{X (28/25)^2 – X} – 6 X/25 = 1800

(28 x 28 x X – 25 x 25 X)/25 x 25 – 6 X/25 = 1800

(784 – 625) X/625 – 6 X/25 = 1800

(159 X – 150) X/625 = 1800

9 X = 1800 x 625

X = 1800 x 625/9

X = 200 x 625

X = 125000

Then, sum will be Rs. 125000.

Hence, the correct answer is option (2) Rs. 125000.