Question

Calculate the difference between the simple interest and the compound interest on Rs. 4,000 in 2 years at 8% per annum compounded yearly.

Answer 1

For 1^st year
P = Rs. 4000
R = 8
T = 1 year

I = `[4000 xx 8 xx 1 ]/100` = 320

A = 4000 + 320 = Rs. 4320

For 2^nd year
P = Rs. 4320
R = 8%
T = 1 year

I = `[ 4320 xx 8 xx 1]/100` = Rs. 345.60

A = 4320 + 345.60 = 4665.60

Compound interest = Rs. 4665.60 - Rs. 4000 = Rs. 665.60

Simple interest for 2 years = `[ 4000 xx 8 xx 2 ]/100` = Rs. 640

Difference of CI and SI = 665.60 - 640 = Rs 25.60.