What is the difference between the maturity value of two deposits of Rs.5,000 each invested for 2 years (i) at 5% simple interest and (ii) at the same interest compounded annually?
maturity value at compound interest
compound interest = $$P(1+\frac{R}{100})^n$$
=$$5000(1+\frac{5}{100})^2$$
= $$ 5000 \times (\frac {21}{20})^2$$
= $$ 900 \times (\frac {11}{10}) \times (\frac {11}{10})$$
=Rs5512.5
maturity value at simple interest
= 5000Â + $$\frac{P\times R\times T}{100}$$
  = 5500
difference = 5512.5 - 5500= 12.5
Rs 12.50
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