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    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?

    A Rs.1277.7 Correct Answer Incorrect Answer
    B Rs.1388.8 Correct Answer Incorrect Answer
    C Rs.1,123.2 Correct Answer Incorrect Answer
    D Rs.1335.2 Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    ATQ, Simple interest = Sum × (rate of interest/100) × (time in years) Simple interest earned in three years = 25,000 × (12/100) × 3 = Rs. 9,000\ Compound interest earned in three years: = 25,000 × {1 + (12/100)}³ - 25,000 = 25,000 × (1.12)³ - 25,000 = 25,000 × 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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