Identify principal from second-year compound interest: Under 10% per annum compound interest (annual compounding), the interest earned in the second year alone is ₹ 132. What is the principal?

Introduction / Context:In compound interest, the second-year interest equals the first year’s amount multiplied by the rate. That is effectively P * r * (1 + r). Knowing the second-year interest lets us back-out P directly.

Given Data / Assumptions:

• Annual rate r = 10% = 0.10
• Second-year interest I2 = ₹ 132
• Compounding annually

Concept / Approach:First-year amount = P * (1 + r). Second-year interest = (P * (1 + r)) * r = P * r * (1 + r). Hence P = I2 / (r * (1 + r)).

Step-by-Step Solution:I2 = P * 0.10 * 1.10 = 0.11P132 = 0.11P → P = 132 / 0.11 = ₹ 1200

Verification / Alternative check:Year-1 interest = 1200 * 0.10 = 120; amount after Year-1 = 1320. Year-2 interest = 1320 * 0.10 = 132 (matches).

Why Other Options Are Wrong:₹ 1000, ₹ 1320, or ₹ 1100 do not yield a second-year interest of ₹ 132 when multiplied by 0.11.

Common Pitfalls:Using I2 = P * r instead of P * r * (1 + r); mixing SI and CI logic will misestimate the second-year interest.

Final Answer:₹ 1200