Question

Find the difference between the compound interest and simple interest. On a sum of Rs. 50000 at $10\%$ per annum for 2 years.

Answer 1

Principal (P) = Rs. 50000
Rate (R) $=10\%$ p.a.
Time (n) = 2 years
Amount $=P{(1+\frac{R}{100})}^n$
$=Rs.50000{(1+\frac{10}{100})}^2=Rs.50000{\left(\frac{11}{10}\right)}^2$
$=Rs.50000\times \frac{11}{10}\times \frac{11}{10}=Rs.60500$
$\therefore$ Compound interest (CI) = A - P
= Rs. 60500 - Rs. 50000 = Rs. 10500
and simple interest $=\frac{PRT}{100}$
$=Rs.\frac{50000\times 10\times 2}{100}=Rs.10000$
$\therefore$ Difference between C.I and S.I.
= Rs. 10500 - Rs. 10000 = Rs. 500