Question

Question 3

Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha 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

Here, Principal (P) = Rs 12,500 Time (T) = 3 years, rate of interest (R) = 12% p.a
Simple Interest for Fabina = $\frac{P\times R\times T}{100}$ = $\frac{12500\times 12\times 3}{100}$ = Rs. 4500.
Amount paid by Radha at the end of 3 years =$1500{(1+\frac{10}{100})}^3=12500{(1+\frac{1}{10})}^3=12500{\left(\frac{11}{10}\right)}^3$
$=12500\times \frac{11}{10}\times \frac{11}{10}\times \frac{11}{10}$
= Rs 16,637.50
$\therefore$ C.I for Radha = A - P = Rs 16,637.50 - Rs 12,500 = Rs 4,137.50
Here, Fabina pays more interest = Rs 4,500 - Rs 4,137.50 = Rs 362.50