Question

3. Find the difference between the simple interest and the compound interest on ₹5000 for 2 years at 9% per annum

Answer 1

Difference between simple interest and compound interest is ₹40.5

Step-by-step explanation:

GIVEN

Principal = ₹5000

Rate = 9%

Time = 2 years

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TO FIND

Difference between simple interest and compound interest

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Simple Interest

We know that,

Simple Interest = Principal × Rate × Time / 100

Simple Interest = 5000 × 9 × 2 / 100

Simple Interest = 90000 / 100

Simple Interest = 900

Simple Interest = ₹900

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Compound Interest

We know that,

$Amount = Principal \times ( 1 + \dfrac{r}{100})^{t}$

$Amount = 5000 \times ( 1 + \dfrac{9}{100})^{2}$

$Amount = 5000 \times ( \dfrac{109}{100})^{2}$

$Amount = 5000 \times \dfrac{109}{100} \times \dfrac{109}{100}$

$Amount = 5000 \times 1.09 \times 1.09$

$Amount = 5940.5$

$Amount = Rs \: 5940.5$

We know that,

Interest = Amount - Principal

Interest = 5940.5 - 5000

Interest = 940.5

Compound Interest = ₹940.5

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DIFFERENCE

Difference = Compound Interest - Simple Interest

Difference = 940.5 - 900

Difference = 40.5

Difference = ₹40.5

Difference between simple interest and compound interest is ₹40.5