The difference between the simple interest and the compound interest at the same rate for ₹32,000 for 2 years is ₹80. What is the rate of interest, if, in the case of compound interest, interest is compounded annually?
Answer & explanation
Correct answer: option 3
Simple Interest = \(\frac{Principal ×Rate × Time }{100}\)
SI= \(\frac{32000 × Rate × 2 }{100}\)
With compound interest , Amount = P × ( 1 + \(\frac{R}{100}\) )²
ATQ,
Difference in compound and simple interest = \(\frac{PR²}{ (100)² }\)
\(\frac{PR²}{ (100)² }\) = 80
\(\frac{32000× R²}{ (100)² }\)= 80
\(\frac{32× R²}{ 10 }\)= 80
R² = 25
R = 5
So , Rate is 5%