Question

find the difference between compound interest and simple interest on rupees 112000 at the rate of 5% for 1.5 year

Answer 1

principle given = P = rs 112000
rate % = r = 5%
time = 't' or 'n' = 1.5 years
simple interest = P × r × t /100
= rs 112000 × 5 × 1.5 /100
= rs 8400
now we will calculate compound interest,
interest for first year,
= P × r × t /100
= 112000 × 5 × 1/100
= rs 5600
now amount = P + I
= rs 112000 + rs 5600
= rs 117600
this amount is the principle for the next half year,
= 117600 × 5 × 0.5/100
= rs 2940
we can see that the simple interest is greater,
therefore , difference = simple interest - compound interest
= rs 8400 - rs 2940
= rs 5460