Question

Find the difference between simple and compound interest on Rs 5000 invested for 3 years at 6% p.a., interest payable yearly.

Answer 1

Case I :
Here P₁ = Rs.5000 and r = 6%
So, Amount after 1 year 
= `"P"(1 + "r"/100)`

= `5000(1 + 6/100)`

= `5000 xx (106)/(100)`
= 5300
Amount after 2 year
= `"P"(1 + "r"/100)`

= `5300(1 + 6/100)`

= `5300 xx (106)/(100)`
= 5618
Thus, P₃ = Rs.5618 and r = 6%
Amount after 3 year
= `"P"(1 + "r"/100)`

= `5618(1+ 6/100)`

= `5618 xx (106)/(100)`
= 5955.08
Hence, Amount = Rs.5955.08
Also, C.I.
= A - P
= Rs.5955.08 - Rs.5000
= Rs. 955.08
Case II :
Simple interest  = `(5000 xx 6 xx 3)/(100)`
= 900
Difference between C.I. and S.I.
= Rs.955.08 - Rs.900
= Rs.55.08.