#### Question

MCQ

The difference between Simple Interest and Compound Interest on Rs. 500 for 1 year at 10% per annum, reckoned half-yearly is

#### Options

Rs. 1

Rs. 1.25

Rs. 1.5

Rs. 2

#### Solution

**Rs. 1.25**

**Explanation:**

As interest is compounded half-yearly.

∴ rate`=10/2` = 5% half-yearly

time = 1 year = 2 half-yearly

Compound interest`=500xx[(1+5/100)^2-1]`

and simple interest`=(500xx5xx2)/100`

Difference`=500xx[(1+5/100)^2-1]-(500 xx5xx2 ) /100`

`=500xx25/(100xx100)=5/4=₨. 1.25`

Concept: Simple and Compound Interest

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