What will be the difference between the compound interest (interest is compounded annually) and simple interest on a sum of ₹ 6400 at the rate of 10% per annum for 2 years?
Given, Principal = Rs.6400
Rate of interest = 10%
Time period = 2 years
Simple Interest for 1 year = 10% of 6400 = Rs.640
Simple Interest for 2 years = 2*640 = Rs.1280
Amount at Compound Interest for 2 years = $$\dfrac{120}{100}\times\dfrac{120}{100}\times6400 = Rs.7744$$
Compound Interest for 2 years = Rs.7744 - Rs.6400 = Rs.1344
Therefore, Difference between Simple Interest and Compound Interest = Rs.1344 - Rs.1280 = Rs.64
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