Question

Find the difference between compound interest and simple interest on ₹45000 at 12% per annum for 5 years.

Answer 1

Principal (P) = ₹45,000
Rate of interest (R) = 12% per annum
Time period (T) = 5 yrs
Simple interest, SI $=\frac{P\times R\times T}{100}=\frac{45,000\times 12\times 5}{100}=450\times 60=₹27,000$
Compound interest, CI = A - P
where, $A=P{(1+\frac{R}{100})}^{T}A=45,000{(1+\frac{12}{100})}^5=45,000\times {\left(\frac{28}{25}\right)}^5=45,000\times {\left(1.12\right)}^5=45,000\times \left(1.76\right)=₹79,200\therefore Compoundinterest,CI=₹(79,200-45,000)=₹34,200\therefore DifferencebetweenSIandCI=₹34,200-₹27,000=$ $₹7,200$