Given:
Difference between the compound interest received for 2 years compounded annually and half yearly = Rs.1762
Time = 2 years
Rate = 10% per annum
Formulas used:
Compound Interest = Amount - Principal
⇒ Amount = Principal + Compound Interest
⇒ Amount = Principal × (1 + r/100)n [n = No of periods]
Calculation:
Amount, when interest is compounded annually:
n = 2, R = 10%
⇒ P (1 + 10/100)2
⇒ P (11/10)2 (1)
Amount, when interest is compounded half yearly:
n = 2 × 2 = 4
Rate = 10%/2 = 5%
⇒ P (1 + 5/100)4
⇒ P (105/100)4
⇒ P (21/20)4 (2)
As per the question:
P (21/20)4 - P (11/10)2 = 1762
⇒ P (21 × 21 × 21 × 21) ÷ (20 × 20 × 20 × 20) - P (11 × 11) ÷ (10 × 10) = 1762
⇒ P [194481/160000 - 121/100] = 1762
⇒ P [(194481 - 1600 × 121)/160000] = 1762
⇒ P [(194481 - 193600)/160000] = 1762
⇒ P [881/160000] = 1762
⇒ P × 881 = 1762 × 160000
⇒ P = (1762 × 160000)/881
⇒ P = 320000
∴ The required sum is Rs.320000.
Alternate Method
Effective rate of interest = x + x + x2/100
Amount = Principal + Compound Interest
Effective rate for 2 years at 10% pa = 10 + 10 + 10 × 10/100
⇒ 20 + 1 = 21%
Effective rate for 2 years at 10% p.a. compounded half yearly:
Rate = 10%/2 = 5% ; Years = 4 half years
⇒ For 2 half years = 5 + 5 + 5 × 5/100
⇒ 10 + 0.25 = 10.25%
For 4 half years = 10.25 + 10.25 + (10.25 × 10.25)/100
⇒ 20.5 + 1.050625 = 21.550625%
∴ Effective rate of interest for 4 half years at 5% = 21.550625%
As per the question:
P × 21.550625% - P × 21% = 1762
⇒ P × 0.550625% = 1762
⇒ P = 1762/0.550625 × 100
∴ P = Rs.320000
Alternate Method By Interest Tree Method:
Let the principal be = 1000
CI at 10% p.a. interest rate, for 2 years
⇒ 210 (1)
CI at 5% interest rate for 4 half years
⇒ Rs.215.50625 (2)
(2) - (1) = 215.50625 - 210 = 5.50625
5.50625 = Rs.1762 [Given]
⇒ 1 = 1762/5.50625
⇒ 1000 = 1762/5.50625 × 1000
⇒ 1000 = Rs.320000
∴ The principal is Rs.320000