A borrowed Rs 10000 each from his friends B and C for 2 years. He was supposed to pay compound interest at 10% per annum to B and simple interest 11% per annum to C. Who charged more interest at the end of 2 years and how much more?
Answer & explanation
Correct answer: option 3
A borrowed from B = 10000
Interest charged = 10%
Time = 2
Amount for 1st year = P(1+ r/100)^T = 10000(1+ 10/100)^1 = 11000
Amount for 2nd year = 1.1*11000 = 12100
Compound Interest = 12100-10000 = 2100
A borrowed from C= 10000
Interest Charged = 11%.
Time = 2
Simple Interest = P*R*T/100 = 10000*11*2/100 = 2200
Difference in interest charged = 2200-2100
The correct answer is Option (3) → C, Rs 100 more