If the simple interest on certain sum of money be Rs. 40 for 2 years and the compound interest on the same sum at the same rate and for the same time be Rs. 45. What is the principle?

Rs. 70
Rs. 90
Rs. 85
Rs. 80

Correct Answer: Rs. 80

Explanation:

S.I. for 2 year = Rs. 40
S.I. for 1 year = Rs. 20
Rate = {(C.I. for 2 year - S.I. for 2 year) / (S.I. for 1 year)} x 100
= {(45 - 40) / 20} x 100 = 25%
∴ Principal = (S.I. x 100)/(Rate x Time)
= (40 x 100)/(25 x 2)
= Rs. 80

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