Question

find difference between the simple interest and compound interest on rupees 5000 for 2 years at 9% annum

Answer 1

1. The compound interest accumulation formula :

P(1 + i)ⁿ = Accumulated amount

P = principle amount

n = Time in years

i = interest

Calculations :

5000(1.09)² = 5940.50

Interest = 5940.50 - 5000 = 940.50

Simple interest formula

Interest = principle × time × rate

Interest = 5000 × 2 × 0.09 = 900

Difference

940.50 - 900 = 40.50

Rs 40.50