For a sum of ₹5,000, what is the difference between the compound interest and simple interest for 2 years if the rate of interest is 5% per annum, and in the case of compound interest, the interest is compounded annually?
Answer & explanation
Correct answer: option 2
The formula used here is,
Difference in the simple interest and compound interest on a certain sum at R% per annum in 2 years = (CI - SI) = $\frac{PR^2}{100^2}$
⇒ $\frac{5000 × 5^2}{100^2}$
⇒ Rs. 12.5