Question

Find the difference between the simple and the compound interest at 5% per annum for 2 years on a principal of Rs.2000.

• A. 5
• B. 105
• C. 4.5
• D. None of these

Answer 1

The correct option is A 5

Here P = Rs. 2000, R = 5%, T = 2 years

$CI-SI=[P{[1+\frac{R}{100}]}^T-P]-\frac{PRT}{100}$

$\{[2000\times \frac{105}{100}\times \frac{105}{100}]-2000\}$

$-\frac{2000\times 5\times 2}{100}$

= 205 - 200 = Rs.5

Alternative :

Difference between CI and SI for two years

$(CI-SI{)}_{2Y}=P{\left(\frac{R}{100}\right)}^2=(200){\left(\frac{5}{100}\right)}^2=5$