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Question
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
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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`
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