Question

A principal of ₹ 40,000 is compounded annually at the rate of 10% for 2 years. What is the compound interest and is it greater than the simple interest for the same rate and the same time?

• A. Rs 8400 ,Yes
• B. 4800 , Yes
• C. Rs 7000, no
• D. No

Answer 1

The correct option is A

Rs 8400 ,Yes

Given that P = ₹ 40,000 ; n = 2 years and R = 10 %

In compound interest, interest is calculated annually.
$A=P(1+\frac{R}{100}{)}^2$
$A=40000(1+\frac{10}{100}{)}^2$
$A=40000\left(\frac{11\times 11}{10\times 10}\right)$
$A=48,400$
Hence C.I = 48,400- 48000 = ₹ 8400

SI =$\frac{P\times N\times R}{100}$ = $\frac{40,000\times 10\times 2}{100}$ = ₹ 8,000

.'. Amount = ₹ 48,000

The simple interest is ₹ 8000 and compound interest is ₹ 8400.
$\therefore$ C.I > S.I