Find the difference between the compound interest and simple interest when a sum of Rs.15,625 is invested for 3 years at 4% per annum.
Answer & explanation
Correct answer: option 1
Simple interest = \(\frac{P×R×T}{100}\)
= \(\frac{15625×4×3}{100}\)
= 1875
Compound interest = Principal × ( 1 + \(\frac{rate }{100}\) )t - Principal
= 15625 × ( 1 + \(\frac{4 }{100}\) )³ - 15625
= 15625 × \(\frac{26 }{25}\) × \(\frac{26 }{25}\) × \(\frac{26 }{25}\) - 15625
= 17576 - 15625
= 1951
Difference b/w CI and SI = 1951 - 1875 = Rs. 76