Question

Mohsin borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Rehan borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?

















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Answer 1

Answer:

For Mohsin

Principal,P =Rs 12500

Simple interest Rate,R = 12% p.a.

Time period,n = 3 years.

Simple Interest, SI at 12% for 3 years =

3*12500*12/100

= Rs 4500

For Radha,

Principal,P =Rs 12500

Compound interest Rate,R = 10% p.a.

Time period,n = 3 years.

We know, Amount when interest is compounded annually,

A=P(1+R/100)n

A=12500(1+10/100)³=₹16637.50

Compound Interest,CI=A-P

Fabina pays more interest and Rs (4500 - 4137.50) = Rs 362.50 more.

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