Without using the formula, find the difference between compound interest and the simple interest on ₹ 16,000 at 9% per annum in 2 years.
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Answers
Solution!!
Principal = Rs 16000
Rate of interest = 9%
Time = 2 years
SI = (P × R × T)/100
SI = (16000 × 9 × 2)/100
SI = 160 × 9 × 2
SI = Rs 2880
Now, let's find the compound interest without using the formula.
First year:-
Principal = Rs 16000
Rate of interest = 9%
Time = 1 year
SI = (P × R × T)/100
SI = (16000 × 9 × 1)/100
SI = 160 × 9 × 1
SI = Rs 1440
Amount = Principal + SI
Amount = Rs 16000 + Rs 1440
Amount = Rs 17440
Second year:-
The amount in the first year becomes the principal in the second year.
Principal = Rs 17440
Rate of interest = 9%
Time = 1 year
SI = (P × R × T)/100
SI = (17440 × 9 × 1)/100
SI = 156960/100
SI = Rs 1569.6
Amount = Principal + Interest
Amount = Rs 17440 + Rs 1569.6
Amount = Rs 19009.6
CI = Amount in second year - Principal in first year
CI = Rs 19009.6 - Rs 16000
CI = Rs 3009.6
We are supposed to calculate the difference between the compound interest and simple interest.
CI - SI
= Rs 3009.6 - 2880
= Rs 129.6
Hence, the difference between the compound interest and simple interest is Rs 129.6.
Abbreviations used:-
P → Principal
R → Rate of interest
T → Time
SI → Simple interest
CI → Compound interest