Question

I borrowed ₹ 12,000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest, what extra amount would I have to pay?

• A. ₹ 483.20
• B. ₹ 423.20
• C. ₹ 43.20
• D. ₹ 48.20

Answer 1

The correct option is C

₹ 43.20

Here, Principal (P) = ₹ 12,000 , Time (T) = 2 years, Rate of interest (R) = 6% p.a.
Simple interest = $\frac{P\times R\times T}{100}=\frac{12000\times 6\times 2}{100}=Rs,1,440$
Had he borrowed this sum at 6% p.a., compound interest, then,
Compound Interest = $P{(1+\frac{R}{100})}^n-P=12000{(1+\frac{6}{100})}^2-12000$
$=12000{(1+\frac{3}{50})}^2-12000$

$=12000{\left(\frac{53}{50}\right)}^2-12000$
= ₹ 13,483.20 - ₹ 12,000
= ₹ 1,483.20
Difference between compound interest ₹ 1,483.20 and the corresponding simple interest is ₹ 1,440.00 is ₹ 43.20