Question 37

What is the difference between the maturity values, if Rs. 12,500 is invested for 2 years at 20% per annum simple interest and compound interest?

Solution

S.I = $$\frac{P\times\ T\times\ R}{100}$$

=$$\frac{12500\times\ 20\times\ 2}{100}=5000$$

A = P + S.I = 12500 + 5000 = 17500

For C.I, A = $$P\left(1+\frac{r}{100}\right)^n$$

A = $$12500\left(1+\frac{20}{100}\right)^2$$

A = $$12500\times\ \frac{120}{100}\times\ \frac{120}{100}$$

A = 18000

Required difference = 18000 - 17500 = 500.

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