Question

Fabina borrows Rs. 12500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same period at 10% per annum, compounded annually. Who pays more interest and by how much?

Answer 1

In case of Fabina:
$P=Rs.12500$

$R=12\%$ per annum and $T=3$ years, then
$SI=\frac{P\times R\times T}{100}=Rs.\left(\frac{12500\times 12\times 3}{100}\right)=Rs.4500$

In case of Radha:
$Amount=P(1+\frac{R}{100}{)}^T$

$Amount=Rs.[12500\times (1+\frac{10}{100}{)}^3]$
$=Rs.(12500\times \frac{110}{100}\times \frac{110}{100}\times \frac{110}{100})=Rs.16637.50$
$\therefore$ Compound Interest $=Rs.(16637.50-12500)=Rs.4137.50$
Hence, Fabina pays $Rs.(4500-4137.50),i.e.,Rs.362.50$ more as interest.