Question

Bharathi borrows an amount of $Rs.12500$ at $12\%$ per annum for $3$ years at a simple interest and Madhuri borrows the same amount for the same time period at $10\%$ per annum, compounded annually. Who pays more interest and by how much

Answer 1

For Bharathi

$P=12500,R=12$%$,T=3$

$SI=\frac{PRT}{100}=\frac{(12500\times 12\times 3)}{100}$

Interest $=44500$

For Madhuri

$P$ and $T$ are same but $R=10$ compounded annually

$CI=P{(1+\frac{R}{100})}^T-P$

$=12500{(1+\frac{10}{100})}^3-12500$

$CI=16637.5-12500$

Interest $=4137.5$

Comparing the interest paid by Bharathi and Madhuri we can see that Bharathi has to pay more and it is equal to the difference$(4500-4137.5)=Rs.362.5$