Question

What will be the difference between the compound interest (interest is compounded annually) and simple interest on a sum of Rs. 3200 at the rate of 20% per annum for 2 years?

• A. Rs. 128
• B. Rs. 148
• C. Rs. 132
• D. Rs. 96

Answer 1

Answer:

A. Rs. 128

Solution: Given: Principal = Rs. 3200 Rate of interest = 20% Time = 2 years Formula Used: Simple interest = (principal × time × rate) / 100 Successive increase = {a + b + (a × b) / 100} Calculation: Simple Interest = (3200 × 20 × 2) / 100 ⇒ Simple interest = Rs. 1280 Now, Compound interest Rate% = 20% Time = 2 So {20 + 20 + (20× 20) / 100} ⇒ 44% ⇒Compound interest = 44% of 3200 ⇒ Rs. 1408 ∴ Difference between compound interest and simple interest = 1408 – 1280 = Rs. 128