Rajan borrowed $R s .5000$ at $8 % p . a .$ for $3$ years. Find the difference between compound interest simple interest, assuming compounded annually.

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Solution

Principal = $R s . 5000$
Time $= 3$ years
rate = $8 %$
$S I = P R T / 100$
$= 5000 \times 8 \times 3 / 100$
$S I = 1200$
Amount compounded Annually
$= 5000 {(\frac{1 + 8}{100})}^{3}$
$= 5000 {(\frac{108}{100})}^{3}$
$= \frac{6298560000}{1000000}$
$= R s 6298.56$
$C I = 6298.56 - 5000 = R s . 1298.56$
Difference between interest
$= 1298.56 - 1200 = R s .98 .56$

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