Find the difference between simple interest and compound interest on ₹20000 at 8 p.c.p.a.
Solution
Disclaimer: In the question "Time" is not given. So the question is solved taking time as 2 years, because simple interest and compound interest will be same for one year.
Here, P = Principal = ₹ 20000
R = 8 %
N = 2 years
Simple interest = `("P" xx "R" xx "N")/100`
= `(20000 xx 8 xx 2)/100`
= 3200
Amount = `"P" (1 + "R"/100)^"N"`
= 20000 `(1 + 8/100)^2`
= 20000 `(1 + 2/25)^2`
= 20000 `(27/25)^2`
= 23328
Compound interest = 23328 - 20000
= 3328
Compound interest - Simple interest = 3328 - 3000
= 128
Hence, the difference between simple interest and compound interest is ₹ 128.
