Calculation of Difference between Compound Interest and Simple Interest

Given:
Principal amount (P) = ?
Interest rate (R) = 7%
Time period (T) = 2 years
Difference between compound interest and simple interest = Rs. 29.4

Formulae:
Simple Interest = (P * R * T) / 100
Compound Interest = P * [1 + (R/100)]^T - P

Steps to solve the problem:

Step 1: Calculation of Simple Interest
Simple interest can be calculated using the formula: (P * R * T) / 100

Here, P is the Principal amount, R is the rate of interest and T is the time period.

Simple Interest (SI) = (P * R * T) / 100

Step 2: Calculation of Compound Interest
Compound interest can be calculated using the formula: P * [1 + (R/100)]^T - P

Here, P is the Principal amount, R is the rate of interest and T is the time period.

Compound Interest (CI) = P * [1 + (R/100)]^T - P

Step 3: Calculation of Difference between Compound Interest and Simple Interest
Difference between Compound Interest and Simple Interest = Compound Interest - Simple Interest

DIfference = CI - SI

Step 4: Calculation of Principal Amount
To calculate the principal amount, we substitute the values of SI, CI, R and T in the above formula and solve for P.

P = (DIfference * 100) / (R * T)

Substituting the given values, we get:

P = (29.4 * 100) / (7 * 2)
P = Rs. 210

Therefore, the Principal amount is Rs. 210.

Conclusion:

- The Principal amount is Rs. 210.
- The difference between Compound Interest and Simple Interest for 2 years at 7% p.a interest is Rs. 29.4.