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Question
Find the difference between the compound interest and simple interest on Rs 20,000 at 12% per annum for 3 years, the compound interest being payable annually.
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Solution
Case I :
Here P1 = Rs.20000 and r = 12%
So, Amount after 1 year
= `"P"(1 + "r"/100)`
= `20000( 1 + 12/100)`
= `20000 xx (112)/(100)`
= 22400
Thus, P2 = Rs.22400 and r = 12%
Amount after 2 year
= `"P"(1 + "r"/10)`
= `22400(1 + 12/100)`
= `22400 xx (112)/(100)`
= 25088
Thus, P3 = Rs.25088 and r = 12%
Amount after 3 year
= `"P"(1 + "r"/100)`
= `25088(1 + 12/100)`
= `25088 xx (112)/(100)`
= 28098.56
Hence, Amount = Rs.28098.56
Also, C.I.
= A - P
= Rs.28098.56 - Rs.20000
= Rs.8098.56
Case II :
Simple interest = `(20000 xx 12 xx 3)/(100)`
= 7200
Difference bertween C.I. and S.I.
= Rs.8098.56 - Rs.7200
= Rs.898.56.
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