Question

Question 4
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?

Answer 1

Here, Principal (P) Rs 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 in both interest
= ₹1,483.20 - ₹1,440.00 = ₹ 43.20