Question

Calculate the difference between the compound interest and the simple interest on Rs.$7,500$ in two years and at $8\%$ per annum.

Answer 1

Given
$P=Rs.7,500$
$N=2$ years
$R=8\%$
Simple Interest $I=\frac{PNR}{100}$
So, Simple Interest in 2 years $I=\frac{7,500\times 2\times 8}{100}=Rs1,200$
And Amount after "n" years of interest being compounded annually $A=P{(1+\frac{R}{100})}^n$
So,Amount after 2 years of compound interest $A=7,500\times {(1+\frac{8}{100})}^2=7,500\times {1.08}^2=Rs8,748$
So, Compound Interest $=A-P=Rs.8,748-Rs.7,500=Rs.1,248$
And difference in CI and SI $=Rs.1,248-Rs.1,200=Rs.48$