What is the difference between the compound interest and simple interest on Rs. 4000 for 2 years at the rate of 5% per annum?OptionsRs. 20Rs. 10Rs. 8Rs. 12
Question
What is the difference between the compound interest and simple interest on Rs. 4000 for 2 years at the rate of 5% per annum?
Options:
- Rs. 20
- Rs. 10
- Rs. 8
- Rs. 12
Solution
First, let's calculate the Simple Interest (SI) and Compound Interest (CI) separately.
The formula for Simple Interest is SI = (PRT)/100, where P is the principal amount, R is the rate of interest, and T is the time in years.
So, SI = (400052)/100 = Rs. 400
The formula for Compound Interest is CI = P(1 + R/100)^T - P, where P is the principal amount, R is the rate of interest, and T is the time in years.
So, CI = 4000(1 + 5/100)^2 - 4000 = Rs. 410
The difference between the Compound Interest and Simple Interest is CI - SI = 410 - 400 = Rs. 10.
So, the answer is Rs. 10.
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