Question

Without using the formula, find the difference between compound interest and the simple interest on $₹16,000$ at $10\%$ per annum in $2$ years.

• A. $₹160$
• B. $₹120$
• C. $₹100$
• D. $0$

Answer 1

The correct option is A $₹160$

$P=₹16,000,R=10\%,T=2\text{years}$

Simple Interest for 2 years $=\frac{PTR}{100}$
$=\frac{16,000\times 2\times 10}{100}$
$=₹3200$

Compound Interest for 1st year
$=\frac{16000\times 1\times 10}{100}$
$=₹1600$

Principal for second year
$=₹16,000+1600=₹17600$

Compound Interest for second year
$=\frac{17600\times 1\times 10}{100}$
$=₹1760$

Total Compound Interest
$=₹1600+₹1760=₹3360$

Hence the difference between C.I and S.I
$=₹3360-₹3200=₹160$