The difference between compound interest and simple interest on a sum for 2 years at 20% per annum, when the interest is compounded annually is ₹ 32. If the interest were compounded half-yearly, the difference in two interests would be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹51.28
For two years the gap between compound and simple interest is P(R/100)2. Here that is P(0.2)2 = 0.04P = 32, so the principal is ₹800.
Compounded half-yearly the rate is 10% for 4 periods: the amount is 800(1.1)4 = ₹1171.28, so CI = ₹371.28. Simple interest stays 800 × 20 × 2/100 = ₹320, and the difference is ₹51.28.