Question

A man invested ₹ 1000 for 3 years at 11per cent simple interest per annum and ₹1000 at 10 % compounded interest per annum compounded annually for three years. Find which investment is better.

Answer 1

for simple interest final investment value A = P(1+RT)
P: Initial investment = 1000
R rate of interet = 11% = .11
T: time = 3 years
A = 1000(1+.11*3) = 1330 rs

for compund interest finl interest A = P(1+R)^T
R = 10% = .1
T = 3 years
A= 1000(1+ 0.1)^3 = 1331 rupees
Thus the second investment is better as it has higher final amount even thugh the rate of interest is lower