Question

2. Find the difference between the simple interest and compound interest on 2500 for 2 years at 4% per annum, compound interest being reckoned semi-annually​

Answer 1

Answer:

It is given that

Principal (P) = 2500

Rate of interest (r) = 4% p.a. or 2% half-yearly

Period (n)= 2 years or 4 half- years

We know that

SI= Prt/100

Substituting the values

= (2500×4×2)/100

= 200

If compounded semi-annually

A = P(1+r/100)

n

Substituting the values

= 2500(1+2/100)

4

By further calculation

=2500×51/50×51/50×51/50×51/50

= 2706.08

We know that

CI = A - P

Substituting the values

=2706.08−2500

=206.08

So the difference between CI and SI =206.08−200=6.08