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Question
I borrowed Rs 12000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest, what extra amount would I have to pay?
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Solution
P = Rs 12000
R = 6% per annum
T = 2 years
S.I = `"P x R x T"/100 = Rs ((12000xx6xx2)/100) = Rs 1440`
To find the compound interest, the amount (A) has to be calculated.
`A = P(1 + R/100)^n = Rs [12000(1 + 6/100)^2]`
`= Rs [12000(1 + 3/50)^2] = Rs(12000 xx 53/50xx 53/50)`
= Rs 13483.20
∴ C.I. = A − P = Rs 13483.20 − Rs 12000 = Rs 1,483.20
C.I. − S.I. = Rs 1,483.20 − Rs 1,440 = Rs 43.20
Thus, the extra amount to be paid is Rs 43.20
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