Question

Find the difference between compound interest and simple interest on an amount of ₹ 1000 for 3 years at 10 % per annum.

• A. ₹ 27
• B. ₹ 31
• C. ₹ 35
• D. ₹ 42

Answer 1

The correct option is B

₹ 31

We know that S.I. = $\frac{PRT}{100}$

where, S.I. is the simple interest, P is the principal, R is the rate of interest per annum and T is the time(number of years).

Given P = ₹ 1000 , T = 3 years and R = 10 %

Simple Interest = $\frac{1000\times 3\times 10}{100}$

= ₹ 300

C.I. for the first year

C. I. = $\frac{P\times T\times R}{100}$

= $\frac{1000\times 1\times 10}{100}$

= ₹ 100

Principal for the second year = 1000 + 100 = ₹ 1100

C.I. for second year

C. I. = $\frac{P\times T\times R}{100}$

= $\frac{1100\times 1\times 10}{100}$

= ₹ 110

Principal for the third year = 1100 + 110 = ₹ 1210

C.I. for third year

C. I. = $\frac{P\times T\times R}{100}$

= $\frac{1210\times 1\times 10}{100}$

= ₹ 121

Total C.I. for three years = ₹ (100 + 110 + 121) = ₹ 331

Difference between C.I. and S.I. = ₹ (331- 300) = ₹ 31