On a certain sum of money, the simple interest for 2 years is ₹150 at the rate of 10% per annum. What is the difference between the compound interest and the simple interest for 2 years if, in the case of compound interest, interest is compounded annually at the rate of 10% per annum.
Answer & explanation
Correct answer: option 3
Given SI = Rs. 150
By using formula ,
Simple interest = \(\frac{Principal ×Rate × Time }{100}\)
150 = \(\frac{Principal × 10 × 2 }{100}\)
Principal = 750
Now , Compound interest rate = 10%
Amount = P× ( 1 + \(\frac{R }{100}\) )t
= 750 × ( 1 + \(\frac{10 }{100}\) )2
= 750 × \(\frac{11 }{10}\) × \(\frac{11 }{10}\)
= 907.5
Amount = Principal + Interest
Compound interest = 907.5 - 750 = 157.5
Required difference b/w Simple interest and Compound interest = 157.5 - 150
= Rs. 7.5