Question

Find the difference between the compound interest and simple interest on a sum of ₹50,000 at 10% per annum for 2 years.

• A. ₹500
• B. ₹1500
• C. ₹600
• D. ₹700

Answer 1

The correct option is A ₹500

Given: P = ₹50,000, R = 10% p.a., n = 2 years.
We know that amount A at the end of n years at the rate R% per annum when the interest is compounded annually is given by:

A $=P{(1+\frac{R}{100})}^n=50,000{(1+\frac{10}{100})}^2=50,000(\frac{11}{10}\times \frac{11}{10})=60,500$

Also,
CI = A − P
= ₹60,500 − ₹50,000
= ₹10,500

We know that:
SI = <!--td {border: 1px solid #cccccc;}br {mso-data-placement:same-cell;}--> $\frac{PRT}{100}$
= 50,000 × 10 × 2100
= ₹10,000

∴ Difference between CI and SI= ₹10,500 − ₹10,000 = ₹500.