*What is the difference between simple interest and compound interest for 2 years at the rate of 5% on Rs.1000?*
Answers
Given : simple interest and compound interest for 2 years at the rate of 5% on Rs.1000
To Find : difference between simple interest and compound interest
1️⃣ Rs. 250
2️⃣ Rs. 2500
3️⃣ Rs. 2.50
4️⃣ Rs. 100
Solution:
SI = P * R * T /100
CI = P(1 + R/100)^T - P
Method 1 :
Difference in interest is , interest of interest earned in 1st year
Interest in 1st year = 1000 x 5 * 1 /100 = 50
Interest for 1 year on Rs 50 = 50 * 5 * 1/100 = =2.50 Rs
Method 2
SI = 1000 * 5 * 2 /100 = Rs 100
CI = 1000(1 + 5/100)² - 1000
=> CI = 1000 (21/20)² - 1000
=> CI = 1000 * 441/400 - 1000
=> CI = 5 * 441/2 - 1000
=> CI = 2205/2 - 1000
=> CI = 1102.5-1000
=> CI = 102.5
Difference between simple interest and compound interest = 102.5 - 100 = Rs 2.5
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