Question

On a certain sum of money, the Simple Interest for 2 years is Rs.140 at 4% per annum. Find the difference between Compound Interest and Simple Interest on the same sum at same rate and same period.

• A. Rs.2.40
• B. Rs.1.80
• C. Rs.2.80
• D. Rs.3

Answer 1

Answer:

C. Rs.2.80

Let's solve this problem step-by-step:

1. Find the Principal Amount:

• Simple Interest (SI) = (Principal (P) × Rate (R) × Time (T)) / 100

• Given: SI = Rs. 140, R = 4%, T = 2 years

• 140 = (P × 4 × 2) / 100

• 140 = 8P / 100

• 14000 = 8P

• P = 14000 / 8 = Rs. 1750

2. Calculate the Compound Interest (CI):

• Amount $(A) = P (1 + R/100)^T$

• $A = 1750 (1 + 4/100)^2$

• $A = 1750 (1 + 0.04)^2$

• $A = 1750 (1.04)^2$

• $A = 1750 (1.0816)$

• $A = Rs. 1892.80$

• CI = A - P

• CI = 1892.80 - 1750 = Rs. 142.80

3. Calculate the Difference between CI and SI:

• Difference = CI - SI

• Difference = 142.80 - 140 = Rs. 2.80