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Question

find the difference between the simple interest and the compound interest on rupees 16000 for 1 and the half years at 5% per annum compounded interest being reckoned half yearly

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Solution

Dear Student,
Case 1
Given : P = Rs. 16000, R = 5 %, T = 3/2 years
Simple Interest = (P*R*T)/100
= (16000*5*3)/(2*100)
Simple Interest = Rs. 1200
Case 2
Compound Interest
Given : P = Rs. 16000, R = 5 % per annum and compounded half yearly so, rate of interest = 2.5 %
T = 3/2 years = 1 year and one half year = 3 half years
A = P (1 +r/100)ⁿ
= 16000 (1 + 2.5/100)³
= 16000 × 102.5/100 × 102.5/100 × 102.5/100
A = Rs. 17230.25
So, compound interest = 17230.25 - 16000 = Rs. 1230.25
Difference between compound interest and simple interest = 1230.25 - 1200 = Rs 30.25

Regards

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