Question

Find the difference between simple interest and compound interest on Rs. $2,400$ at $2$ years at $5$% per annum compounded annually.

Answer 1

SI $=\frac{P\times R\times T}{100}$

SI $=\frac{2400\times 2\times 5}{100}=240$

Compound interest:

Interest for first year $=\frac{2400\times 5\times 1}{100}=120$

Amount after first year $=2400+120=2520$

Interest for second year $=\frac{2520\times 5\times 1}{100}=126$

Amount after first year $=2520+126=2646$

Hence compound interest $=2646-2400=246$

Difference between CI and SI $=246-240=6$