I borrowed Rs.12000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest, what extra amount would I have to pay?
Answers
Answer:
The extra amount that you would have to pay is Rs.43.20
Step-by-step explanation:
P = initial amount = sum borrowed = Rs.12,000
R = rate of interest per cent per year = 6
T = time period in years = 2
A = final amount repaid at the end of period T
Case 1: Simple Interest
Simple interest (SI) = (P*R*T)/100
SI = (12000*6*2)/100
= 1440
Simple interest paid = Rs.1440 ...(i)
Case 2: Compound Interest
A = P(1 + R/100)^T
A = 12000*(1 + 6/100)^2
= 12000*(1 + 0.06)^2
= 12000*(1.06)^2
= 12000*(1.1236)
= 13483.2
Compound Interest paid = A - P
CI paid = 13483.2 - 12000
= 1483.2
Compound Interest paid = Rs.1483.20 .........(ii)
Extra amount to be paid = CI paid - SI paid
= 1483.20 - 1440
= 43.20
The extra amount that you would have to pay is Rs.43.20