Find Difference between Simple and Compound Interest

The difference between the simple interest and the compound interest on Rs 5000 at 10% p.a. for 3 years is:

  1. Rs. 145
  2. Rs. 150
  3. Rs. 165
  4. Rs. 155
Monis Rasool Professor Asked on 13th September 2015 in Maths.
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  • 1 Answer(s)

    Answer: (4) Rs. 155

    Explanation:-
    Given-
    Principal = Rs. 5000, Rate = 10% and Time = 3 years

    Formula-
    Simple Interest = P x R x T/100
    Where, P = principal, R = rate, & T = time.

    Then, the simple interest = 5000 x 10 x 3/100
    = Rs. 1500

    Formula-
    Compound Interest = P [(1 + R/100)t – 1]
    Where, P = principal, R = rate, t = time.

    Then, the compound interest = 5000[ (1 + 10/100)3 – 1]
    = 5000 [ (1 + 1/10)3 – 1]
    = 5000 (11 x 11 x 11/10 x 10 x 10 – 1)
    = 5000 (1.331 – 1)
    = 5000 x 0.331
    = Rs. 1655

    Then, the difference between compound interest and simple interest = 1655 – 1500
    = Rs. 155

    Hence, the answer is (4) Rs. 155.

    Anurag Mishra Professor Answered on 13th September 2015.
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