Question
A sum of ₹20,000 is invested at an annual rate of
interest of 10%. Calculate the difference between simple interest and compound interest after 3 years.Solution
Simple interest (SI) = P × R × T / 100 = 20,000 × 10 × 3 / 100 = ₹6,000. Compound interest (CI) = P(1 + R/100)^T - P = 20,000(1 + 10/100)^3 - 20,000 = 20,000(1.1)^3 - 20,000 = 26,620 - 20,000 = ₹6,620. Difference = ₹6,620 - ₹6,000 = ₹620.
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