Question
A man invested Rs. 25,000 at simple interest of 12% p.a.
If he had instead invested the same sum on compound interest of 12% p.a., compounded annually, then how much more he would have earned as interest after 3 years?Solution
ATQ, Simple interest = Sum Ă— (rate of interest/100) Ă— (time in years) Simple interest earned in three years = 25,000 Ă— (12/100) Ă— 3 = Rs. 9,000\ Compound interest earned in three years: = 25,000 Ă— {1 + (12/100)}Âł - 25,000 = 25,000 Ă— (1.12)Âł - 25,000 = 25,000 Ă— 1.404928 - 25,000 = Rs. 35,123.2 - 25,000 = Rs. 10,123.2 So, required difference = 10,123.2 - 9,000 = Rs. 1,123.2
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