Question

Find the difference between the compound interest and simple interest on Rs 20,000 at 12% per annum for 3 years, the compound interest being payable annually.

Answer 1

Case I :
Here P₁ = Rs.20000 and r = 12%
So, Amount after 1 year 
= `"P"(1 + "r"/100)`

= `20000( 1 + 12/100)`

= `20000 xx (112)/(100)`
= 22400
Thus, P₂ = Rs.22400 and r = 12%
Amount after 2 year
= `"P"(1 + "r"/10)`

= `22400(1 + 12/100)`

= `22400 xx (112)/(100)`
= 25088
Thus, P₃ = Rs.25088 and r = 12%
Amount after 3 year
= `"P"(1 + "r"/100)`

= `25088(1 + 12/100)`

= `25088 xx (112)/(100)`
= 28098.56
Hence, Amount = Rs.28098.56
Also, C.I.
= A - P
= Rs.28098.56 - Rs.20000
= Rs.8098.56
Case II :
Simple interest = `(20000 xx 12 xx 3)/(100)`
= 7200
Difference bertween C.I. and S.I.
= Rs.8098.56  - Rs.7200
= Rs.898.56.