I borrowed ₹12,000 at 6% per annum on simple interest for 2 years. Had I borrowed the sum at 6% per annum on compound interest for the same duration, then what extra amount would have I paid as interest?
Answer & explanation
Correct answer: option 2
Amount = Principal + Interest
In case of simple interest,
SI = \(\frac{ P × R ×T}{ 100}\)
= \(\frac{ 12000 × 6 ×2}{ 100}\)
= 1440
In case of compound interest,
A = P( 1 + \(\frac{ R}{ 100}\) )n
= 12000( 1 + \(\frac{ 6}{ 100}\) )²
= 12000( \(\frac{ 53 }{ 50}\) )²
13483.20
Compound interest = 13483.20 - 12000
= 1483.20
Now, Difference b/w CI and SI = 1483.20 - 1440
= 43.20
The correct answer is Option (2) → ₹43.20