Question

Find the difference between compound interest and simple interest on Rs. 8,000 in 2 years and at 5% per annum.

Answer 1

Given : P = Rs. 8,000, R = 5%, T = 2 years
For simple interest,

S.I. = `[ "P" xx "R" xx "T"]/100`

= `[8,000 xx 5 xx 2]/100`

= Rs. 800

For compound interest,

`"A" = "P"( 1 + r/100 )^n`

`"A" = 8,000( 1 + 5/100 )^2`

= `8,000 xx 21/20 xx 21/20`

= Rs. 8,820

C.I. = A - P
      = Rs. (8,820 - 8,000)
      = Rs. 820

Now, C.I. - S.I. = Rs. ( 820 - 800 ) = Rs. 20.
Thus, the difference between the compound interest and the simple interest is Rs. 20.