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Explanation:

If we do this problem using Pascal’s triangle we can solve easily.

At the end of 2 years, CI = 2 SI + II, SI = 2 SI where II = Interest on Interest

At the end of 3 years, CI = 3 SI + 3 II + Ill, SI = 3 SI where Ill = Interest on Interest on Interest

Difference = 3II + Ill = 708.75

or lll = 708.75−3×225=33.75

Rate of interest = III\II×100=33.75\225×100 = 15%

The difference at the end of two years is Rs.225 which is the interest on interest at the rate of

15% per annum.

Therefore, the simple interest during year 1 = 225\15×100 = Rs.1500. As the simple interest is Rs.1500 per year and the rate of interest is 15%, the principal invested = 1500\15×100 = Rs.10,000