Question

Sujatha borrows rs.12500 at 12% per annum for 3 years at simple interest and radhika borrows the same amount for the same time period at 10% per annum compounded annually. Find the difference between simple and compound interest rate for 3 years

Answer 1

Interest of Sujatha:

simple interest = principle * rate of interest * time

= 12500*12*3/100

=4500

Interest of Radhika:

amount - principle = interest

amount= principle (1+ rate of interest)^ number of years

= 12500(1+10/100)^3

=12500(11/10)^3

=12500*11/10*11/10*11/10

=16637.5

Difference Between both the interests:-

16637.5 - 4500 = 4137.5

Answer = 4137.5