Varun and Madhur invested ₹25,000 each in different schemes. Varun earned simple interest at 11% per annum, whereas Madhur earned compound interest at 10% per annum compounded annually. Who received more interest after 2 years and how much?
Answer & explanation
Correct answer: option 4
In case of Varun ,
Simple Interest = \(\frac{P × R × T}{100}\)
= \(\frac{25000 × 2 × 11}{100}\)
= 5500
In case of Madhur,
Compound Interest = P$(1 \;+\; \frac{R}{100})^t$ - P
= 25000 × [ 1 + \(\frac{ 10 }{100}\) ]² - 25000
= 25000 × [ \(\frac{ 11 }{10}\) ]² - 25000
= 25000 × \(\frac{ 11 }{10}\) × \(\frac{ 11 }{10}\) - 25000
= 30250 - 25000
= 5250
Difference b/e simple interest and compound interest = 5500 - 5250 = Rs. 250
So, varun earned more Rs. i.e. 250
Ans :- Varun , Rs. 250