Q.What is the difference between the simple interest and compound interest on ₹1250 for 2 years at a rate of 4%? (a) ₹ 8 (b) ₹ 4 (c) ₹ 3 (d) ₹ 2
Answer: D
Simple interest = \(\frac{1250 \times 2 \times 4}{100}\) rupees = ₹100 Compound amount for 2 years = \(1250(1 + \frac{4}{100})^2\) rupees = \(1250(1 + \frac{1}{25})^2\) rupees = \(1250 \left(\frac{26}{25}\right)^2\) rupees = \(1250 \times \frac{26}{25} \times \frac{26}{25}\) rupees = ₹1352 ∴ Compound interest = ₹1352 − ₹1250 = ₹102 ∴ Difference between compound interest and simple interest = ₹102 − ₹100 = ₹2
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