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Johny deposited 15000 rupees in a bank which compounds interest at 8%. He withdrew the amount after 2 years. Suppose simple interest was given instead of compound interest. What would be the difference in interest?

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Solution

Amount deposited by Johny = Rs.15000

Rate of compound interest = 8%

Number of years, n = 2

Case 1: When compound interest is given

Interest for the first year = Rs.15000 ×= Rs.1200

Principal for the second year = Amount of money deposited + interest for the first year

= Rs.15000 + Rs.1200

= Rs.16200

Now, the interest for the second year is calculated on the amount Rs.16200.

∴ Interest for the second year = Rs.16200 × = Rs.1296

So, the total interest for 2 years = Rs.1200 + Rs.1296 = Rs.2496

Case 2: When simple interest is given

Simple interest on Rs.15000 at 8% interest for 2 years = Rs.15000 × × 2

= Rs.2400

Thus, the difference between the compound interest and the simple interest = Rs.2496 − Rs.2400

= Rs.96

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Can you find out? Johny deposited 15000 rupees in a bank which compounds interest at 8%. He withdrew the amount after 2 years. Suppose simple interest was given instead of compound interest. What would be the difference in interest?

Can you find out?

Johny deposited 15000 rupees in a bank which compounds interest at 8%. He withdrew the amount after 2 years. Suppose simple interest was given instead of compound interest. What would be the difference in interest?