Rama borrowed ₹ 18000 from her friend at 8% per annum for 3 years. find the amount paid by Rama after 3 years, if interest is compounded annually
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Answer:
Money borrowed (P) = Rs 18000
Rate (R) = 8% p.a.
Time (n) = 2 years
Simple Interest = PRT / 100
= Rs (18000 × 8 × 2) / 100
= Rs 2880
In case of compound interest
A = P {1 + (R / 100)}n
= Rs 18000 {1 + (8 / 100)}2
= Rs 18000 × (27 / 25)2
= Rs 18000 × (27 / 25) × (27 / 25)
We get,
= Rs 104976 / 5
= Rs 20995.20
Hence,
Compound interest = Amount – Principal
= Rs 20995.20 – Rs 18000
= Rs 2995.20
Now,
Difference between compound interest and simple interest
= Rs 2995.20 – Rs 2880
= Rs 115.20
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