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Question
Find the difference between the compound interest and the simple interest in 2 years on Rs 5,000 at 8% p.a. compounded annually.
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Solution
Here P = Rs 5000 · r = 8 % t = 2years
For simple interest:
S.I. = `("P" xx "r" xx "t")/100`
S.I. = Rs `(5000 xx 8 xx 2)/100`
S.I. = Rs 800
For compound interest:
`"A" = "P" (1 + "r"/100)^"n"`
A = Rs 5000 `(1 + 8/100)^2`
A = Rs `5000 xx 108/100 xx 108/100`
A= Rs 5,832
C.l. = A - P
C.l. = Rs (5832 -5,000)
C.l. = Rs 832
The difference in the compound interest and the simple interest
= Rs (832 - 800)
= Rs 32.
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