Calculate the difference between the compound interest and the simple interest on a sum of ₹5,000 at the rate of 8% for 3 years. (to nearest ₹)
Answer & explanation
Correct answer: option 4
We know ,
Simple Interest = \(\frac{Principal ×Rate × Time }{100}\)
= \(\frac{5000 × 8 × 3 }{100}\)
= Rs. 1200
Compound Interest = Principal × ( 1 + \(\frac{Rate }{100}\))t - Principal
= 5000 × ( 1 + \(\frac{8 }{100}\))³ - 5000
= 5000 × \(\frac{27}{25}\) × \(\frac{27 }{25}\) × \(\frac{27 }{25}\) - 5000
= 6298.56 - 5000
= 1298.56
Now , Difference b/w CI and SI = 1298.56 - 1200 = 98.56
= Rs.99 ( approx )