Question

If P = 200, R = 4% p.a. T = 2 years. Find the Simple Interest.

Dont spam ​

Answer 1

Simple interest for 2 years is 200 INR

2 * 7 % * Principal = 200

Principal = 200 / 7 % / 2 = 1428.57 INR

Amount = P * (1+r)^n

Amount = 1428.57* (1 + 7%)^2 = 1635.57 INR

Compound interest is 1635.57 - 1428.57 = 207 INR

Difference is 207 - 200 = 7 INR.

This makes sense because the interest earned in first year in both simple interest and compound interest is 100 INR. In simple interest, this interest does not earn its own interest. But in compound interest, the interest of 100 INR earned in the first year yields its own interest at 7% p.a. which is 7 INR.

I HOPE it's HELPFUL for you