Suppose Diya invests Rs. 1000 in a bank. The bank says “10% interest”. It means the bank will pay an amount increased by 10% after 1 year.
Interest = Rs. 1000 × 10% = Rs. 100. So, the increased amount after one year = Rs. 1000 + Rs. 100 = Rs. 1100.
What if Diya invests the money for 2 years?
Answers
Step-by-step explanation:
Interest for first year = Rs. 1000 × 10% = Rs. 100
Interest for second year = Rs. 1000 × 10% = Rs. 100
Total interest = (Rs. 1000 × 10%) + (Rs. 1000 × 10%) = Rs. 1000 × 10% × 2 = Rs. 200
Here, Rs. 1000 is the Principal (P), 10% is the percentage increase or interest rate (R), 2 is the time period (T).
Therefore, the general formula for simple interest (S.I.) is SI = P × R × T/100.
Now, the total money that Diya will get after 2 years will be Rs. 1000 + Rs. 200 = Rs. 1200. The sum of money which Diya will get back is called amount.
So, Amount = Principal + Interest.
Principal sum = ₹1000, interest rate = 10%p.a. , time= 4yrs.
Simple interest= P.R.T/100
= 1000×10×4/100 = 400.
Compound interest= P{1+ R/100}™ - P =1000{1+10/1000}^4-1000 = 1464.1 - 1000 = 464.1 Thus difference in interests= 464.1 - 400 = ₹64.1.