Question

What is the difference between compound interest and simple interest for the sum of 20000 over a 2 year period, if ci is calculated at 20% p.A. And si is calculated at 23% p.A.?

Answer 1

Answer:

Here is your answer

Second photo is the first part of my answer

Answer 2

Concept:

Simple Interest: It's the type of interest which is calculated on the principal amount and remains constant for every year.

Principal amount is the original amount invested in a investment.

Rate of interest is the rate at which the simple or compound interest is being calculated.

Compound Interest: It means the amount of interest is not same for every year.

Given:

We are given that :

Principal amount is 20000

Time period is 2 years.

Compound interest is 20% and simple interest is 23%.

Find:

We need to find the difference between the compound interest and the simple interest.

Solution:

We will first find the simple interest for the data given:

Simple Interest =PRT/100

Simple Interest =(20000×23×2)/100

Simple Interest =9200

Now we will calculate the compound interest for the data given:

Compound Interest =P(1+R/100)^n -P

Compound Interest =20000(1+20/100)^2-20000

Compound Interest =28800-20000

Compound Interest =8800

Now we will calculate the difference between the compound interest and the simple interest:

=9200-8800

=400

This means that simple interest is greater than the compound interest.

Therefore, the the difference between the compound interest and the simple interest is equal to 400.

#SPJ3