Find the difference between compound interest and simple interest on rs 4000 for 1 yr at 10%p.A if the interest is componunded half yearly
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The formulas are as follows:
Simple interest = Principle × rate/100 × time
Compound interest = Principle × (1 + i)ⁿ - Principle
Since the compounding is done semiannually the n or rather the time in both cases will be given by :
2n
Simple interest = 4000 × 10/100 × 2 = 80
Compound interest:
4000(1.10)² - 4000
= 4840 - 4000 = 840
The difference is therefore given by :
840 - 80 = 760
The answer is therefore :
= Rs 760
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