Question 52

What is the difference between the compound interest and the simple interest on ₹2,000 at 10% interest per annum for 2 years, if, for compound interest, interest is compounded annually?

Solution

difference between the compound interest and the simple interest for 2 years = $$principal\left(\frac{rate}{100}\right)^2$$

= $$2000\left(\frac{10}{100}\right)^2$$

= $$2000\left(\frac{1}{10}\right)^2$$

= $$2000\times\frac{1}{100}$$

= ₹20

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