Question

A principal of ₹ 50,000 is invested at the rate of 10% for 2 years in compound interest. Find the compound interest and the difference between C.I and S.I.

• A. ₹ 10,500 , ₹ 1000
• B. ₹ 10,000 , ₹ 500
• C. ₹ 10,500 , ₹ 500
• D. ₹ 10,500 , ₹ 1500

Answer 1

The correct option is C

₹ 10,500 , ₹ 500

According to the question, interest is only for 2 years

P = ₹ 50,000

In compound interest, interest is calculated annually.
Amount after $1^{st}$ year is $A_1$ = $50,000\times \frac{10}{100}$= ₹ (5,000 + 50,000) = ₹ 55,000
Similarly $A_2=55,000+(55,000\times \frac{10}{100}$) = ₹ 60,500

Total compound interest = $A_2-A_1$ = ₹ 60,500 - ₹ 50,000 = ₹ 10,500

In Simple Interest

SI =$\frac{PNR}{100}$ = $\frac{50,000\times 10\times 2}{100}$ = ₹ 10,000

The simple interest is ₹ 10,000 and compound interest is ₹ 10,500. Therefore, the difference is ₹ 500