Question

The difference between $C.I.$ (Compound Interest) and $S.I.$ (Simple Interest) on a sum of Rs. $4,000$ for $2$ years at $5$% p.a. payable is:

• A. Rs. $20$
• B. Rs. $10$
• C. Rs. $50$
• D. Rs. $60$

Answer 1

The correct option is B Rs. $10$

For the first year, Simple Interest = Compound Interest $=\frac{PTR}{100}$
$I_1=\frac{4000\times 1\times 5}{100}=200$
For the second year, simple interest remains same and compund interest will be the simple interest on new amount$=4000+200=4200$
Compound Interest for second year $=\frac{4200\times 1\times 5}{100}=210$
Simple Interest for second year$=I_1=200$
Difference $220-210=Rs.10$