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Question

Find the difference between the simple interest and compound interest on Rs 4800 for 2 years at 5% per annum, compound interest being reckoned annually.

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Solution

Simple Interest:
P=Rs 4800 r=5%p.a t=2 years
SI=Ptr100=Rs.4800×2×5100=Rs 480

Compound interest:
Case I
P=Rs 4800 r=5%p.a. t=1 year
Interest =Rs.4800×5×1100=Rs 240
A=Rs (4800+240)=Rs 5040
Case II
P=Rs 5040 r=5%p.a. t=1 year
Interest =Rs.5040×5×1100=Rs 252.
A=Rs (5040+252)=Rs 5292.
Compound Interest =Rs(52924800)=Rs 492
Difference between compound Interest and Simple Interest =Rs (492480)=Rs.12

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