Given:
Difference between simple interest and compound interest on a certain sum of money = Rs. \(120\)
Time \(=2\) years
Rate of interest \(=8 \%\)
We know that:
Simple interest \(=\frac{(P \times r \times t)}{100} \quad[\because P=\) principle, \(t=\) time, \(r=\) rate of interest \(]\)
Compound Interest \(=\left[P(1+\frac{r}{100})^{ t}-P\right] \quad[\because P=\) principle amount, \(t=\) time, \(r=\) rate of interest, \(n=\) number of times interest applied per time periods]
Let, the sum i.e., Principal amount \(=\) Rs \(100 x\)
\(\therefore\) Simple interest earned = Rs.\(\frac{(100 x \times 2 \times 8)}{100}=\) Rs. \(16 x\)
\(\therefore\) Compound interest earned \(=\) Rs. \(\left[100 x \times(1+\frac{8}{100})^{2}-100 x\right]\)
\(=\) Rs. \((\frac{2916 x}{25}-100 x)\)
According to the question,
\((\frac{2916 x}{25}-100 x)-16 x=120\)
\(\Rightarrow\frac{(2916 x-2900 x)}{25}=120\)
\(\Rightarrow 16 {x}=3000\)
\(\Rightarrow {x}=\frac{3000}{16}\)
\(\Rightarrow {x}=\frac{375}{2}\)
\(\Rightarrow\) Total Sum \(=\) Rs. \((\frac{100 \times 375}{2})=\) Rs. 18,750
\(\therefore\) Total sum is Rs. 18,750.