The difference between compound interest and simple interest on a certain principal for two years at 20% rate of interest is Rs. 25. What is the Principal amount ? (Answer with theory)

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  1. let the principal be P

    simple interest:
    amount = P + .2P(2) = P(1 + .4) or 1.4P

    compound interest amount = P(1.2)^2

    P(1.2)^2 - 1.4P = 25

    solve for P

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