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
The correct answer is Option (3) → C, Rs 100 more
Simple interest is charged on the principal alone every year; compound interest is also charged on the interest of the earlier year.
B, compound interest at 10% for 2 years:
Amount \(=10000\times(1.1)^2=12100\)
Interest \(=12100-10000=\) Rs 2100
C, simple interest at 11% for 2 years:
Interest \(=\displaystyle\frac{10000\times11\times2}{100}=\) Rs 2200
C charges Rs 2200 − Rs 2100 = Rs 100 more.