Question

Calculate the difference between compound interest and simple interest for $2$ years on Rs. $8500$ at $6\%$ per annum.

Answer 1

Given

$P=Rs.8500,R=6\%,n=2$ yrs

We know that amount $A$ at the end of $n$ years at the rate $R$ % per annum when the interest is compounded annually is

$A=P{(1+\frac{R}{100})}^n$

$=8500{(1+\frac{6}{100})}^2$

$=8500{\left(\frac{106}{100}\right)}^2=\frac{85\times {106}^2}{100}=0.85\times {106}^2$

$=Rs.9550.6$

Also $CI=A-P=9550.6-8500.0=Rs1050.6$

We know that $SI=\frac{PRT}{100}$

$=\frac{8500\times 6\times 2}{100}=Rs1020$

$\therefore$ Difference between CI and SI

$CI-SI=9550.6-1020.0=Rs.8530.6$