Question
A sum of Rs. 10,000 is invested at a rate of 8% per
annum for 3 years. What will be the difference between the compound interest compounded annually and simple interest at the end of 3 years?Solution
Simple interest (SI) = (P × R × T) / 100 = (10,000 × 8 × 3) / 100 = Rs. 2,400 Compound interest (CI) = P(1 + R/100)^T - P CI = 10,000(1 + 8/100)^3 - 10,000 CI = 10,000(1.08)^3 - 10,000 = 10,000(1.259712) - 10,000 = Rs. 2,597.12 Difference = Rs. 2,597.12 - Rs. 2,400 = Rs. 197.12 Answer: c) Rs. 197.1
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