Question

The difference between simple and compound interest calculated annually on ₹ 50,000 for 2 years at 5% will be

• A. Rs 125
• B. Rs 120
• C. Rs 130
• D. Rs 135

Answer 1

The correct option is

A

Rs 125

Given

P= 50,000

R= 5%

T = 2 years

S.I = $\frac{P\times R\times T}{100}$
S.I = $\frac{50,000\times 5\times 2}{100}$
=5000

$A=P(1+\frac{r}{100}{)}^n$

$=50,000(1+\frac{5}{100}{)}^2$

$=50,000(\frac{105}{100}{)}^2$

$=50,000\times \frac{105}{100}\times \frac{105}{100}$

$=55125$
C.I = A-P
= 55125-50000
=5125
Difference between C.I and S.I
= C.I - S.I
= 5125-5000
= ₹125