Question

*What is the difference between simple interest and compound interest for 2 years at the rate of 5% on Rs.1000?*

1️⃣ Rs. 250
2️⃣ Rs. 2500
3️⃣ Rs. 2.50
4️⃣ Rs. 100​

Answer 1

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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