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    Question

    A man invested Rs. 20,000 at simple interest of 10% p.a.

    If he had instead invested the same sum on compound interest of 10% p.a., compounded annually, then how much more he would have earned as interest after 2 years?
    A Rs.200 Correct Answer Incorrect Answer
    B Rs.150 Correct Answer Incorrect Answer
    C Rs.195 Correct Answer Incorrect Answer
    D Rs.225 Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    ATQ, Simple interest = Sum × (rate of interest/100) × (time in years) Simple interest earned in two years = 20,000 × (10/100) × 2 = Rs. 4,000 Compound interest earned in two years: = 20,000 × {1 + (10/100)}² - 20,000 = 20,000 × (1.1)² - 20,000 = 20,000 × 1.21 - 20,000 = Rs. 24,200 - 20,000 = Rs. 4,200 So, required difference = 4,200 - 4,000 = Rs. 200

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