Question

I borrowed Rs 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?(round off the number with its nearest integer)

Answer 1

Interest when paid as Simple Interest
S.I. = $\frac{(P\times R\times T)}{100}$
S.I. = $\frac{12000\times 6\times 2}{100}$
S.I. =$Rs1440$
Interest paid when compounded
$Amount=Principal(1+\frac{R}{100}{)}^{Time}$
$Amount=12000(1+\frac{6}{100}{)}^2$
$Amount=13483.20$
Interest = $13483.20-12000=Rs1483.20$
If compounded annually more Interest paid = $1483.20-1440=Rs43.20$

Rounding off to its nearest integer=$43$ Rs