Multiple choice

Atul gave Rs. 12,000 to each of his two friends on interest for 2 years. For one, he calculated the interest at a rate of 6% (simple interest) and for the other, he calculated the interest at a rate of 5% compounded annually. What would be the difference between the amounts of interest paid by both friends?

  1. Rs. 48

  2. Rs. 82

  3. Rs. 122

  4. Rs. 210

  5. Rs. 225
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Simple interest for 2 years at 6% = 12,000 * 0.06 * 2 = 1440. Compound interest for 2 years at 5% = 12,000 * (1.05^2 - 1) = 12,000 * 0.1025 = 1230. The difference is 1440 - 1230 = 210.

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