Find the difference between the simple and the compound interest on Rs. 5000 for 2 years at 9% per annum, compoundedannually
Question
Find the difference between the simple and the compound interest on Rs. 5000 for 2 years at 9% per annum, compounded annually
Solution
Sure, let's calculate the difference between the simple and compound interest.
Step 1: Calculate Simple Interest Simple Interest (SI) = (P * R * T) / 100 Where: P = Principal amount = Rs. 5000 R = Rate of interest = 9% per annum T = Time = 2 years
So, SI = (5000 * 9 * 2) / 100 = Rs. 900
Step 2: Calculate Compound Interest Compound Interest (CI) = P [(1 + R/100)^T - 1] So, CI = 5000 [(1 + 9/100)^2 - 1] = Rs. 945
Step 3: Find the difference Difference = CI - SI = 945 - 900 = Rs. 45
So, the difference between the simple and the compound interest on Rs. 5000 for 2 years at 9% per annum, compounded annually is Rs. 45.
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