Question 120

What is the difference (in Rs) between compound interest and simple interest for 3 years on a principal of Rs 1000 at the rate of 20% per annum?

Solution

Principal sum = Rs. 1000

Rate of interest = 20% and time period = 3 years

Difference between compound interest and simple interest = $$P[(1+\frac{R}{100})^T-1]-(\frac{P\times R\times T}{100})$$

= $$1000[(1+\frac{20}{100})^3-1]-(\frac{1000\times20\times3}{100})$$

= $$1000[(\frac{6}{5})^3-1]-(600)$$

= $$1000\times(\frac{216-125}{125})-600$$

= $$(8\times91)-600$$

= $$728-600=128$$

=> Ans - (C)

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