Question

Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?

Answer 1

Interest paid by Fabina = `"P x  R x T"/100`

= Rs `((12500xx12xx3)/100)` =  Rs4500

Amount paid by Radha at the end of 3 years = A = `P(1 + R/100)^n`

A = Rs `[12500(1 + 10/100)^3]`

= Rs `(12500xx 110/100xx110/100xx110/100) = Rs 16637.50`

C.I. = A − P = Rs 16637.50 − Rs 12500 = Rs 4,137.50

The interest paid by Fabina is Rs 4,500 and by Radha is Rs 4,137.50.

Thus, Fabina pays more interest.

Rs 4500 − Rs 4137.50 = Rs 362.50

Hence, Fabina will have to pay Rs 362.50 more.