Question
A sum of ₹8000 is invested at 10% per annum for 2
years. Find the difference between the compound interest (compounded annually) and the simple interest on the same sum and rate.Solution
Principal P = ₹8000, Rate r = 10% p.a., Time t = 2 years. Simple Interest (SI) = (P × r × t) / 100 = (8000 × 10 × 2) / 100 = ₹1600 Compound Amount (A) = P(1 + r/100)t = 8000 × (1.10)2 = 8000 × 1.21 = ₹9680 Compound Interest (CI) = A − P = 9680 − 8000 = ₹1680 Difference = CI − SI = 1680 − 1600 = ₹80
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