Question
What is the difference between the compound interest and simple interest on Rs 5000 at 10% per annum for 2 years?
Solution
Simple Interest (SI) = (P × R × T) / 100 = (5000 × 10 × 2) / 100 = 1000 Compound Interest (CI) for 2 years at 10%: Amount = P × (1 + R/100)^2 = 5000 × (1 + 10/100)^2 = 5000 × (11/10)^2 = 5000 × (121/100) = (5000 × 121) / 100 = 6050 CI = Amount − Principal = 6050 − 5000 = 1050 Difference = CI − SI = 1050 − 1000 = 50
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