Question

Aman borrows 14,500 at 11% per annum for three years at simple interest and Tarun borrows the same amount at 10% per annum for the same time compounded annually. Who pays more interest and by how much?​

Answer 1

Step-by-step explanation:

Case 1:

Principal amount; P = Rs.14500

Rate; R = 11% p.a.

Time; T = 3 years

Simple Interest = P × R × T/100 = 14500 × 11 × 3/100 = Rs. 4785

Therefore Aman has to pay Rs.4785 interest.

Case 2:

Principal amount; P = Rs.14500

Rate; R = 10% p.a.

Time; T = 3 years

So the amount accumulated after 3 years;

A = P(1 + R/100)^TP(1+R/100)

T

= 14500 × (1+10/100)³ = Rs.19299.5

Then Compound interest = Rs.19299.5 - Rs.14500 = Rs.4799.50

Therefore Tarun has to pay Rs.4799.50 interest.

This means Tarun pays more interest and by (Rs.4799.50 - Rs.4785) = Rs 14.50