Multiple choice

Simple interest on a certain sum for 3 years at 4% p.a. is Rs. 303.60. If the amount was kept at compound interest compounded annually, the difference between compound interest and simple interest would be

  1. Rs. 12.31

  2. Rs. 12.91

  3. Rs. 13.91

  4. Rs. 14.11
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A Correct answer
Explanation

Simple Interest = P*R*T/100 -> 303.60 = P*4*3/100 -> P = 2530. Compound Interest for 3 years at 4% = 2530 * ((1.04)^3 - 1) = 2530 * 0.124864 = 315.90592. Difference = 315.91 - 303.60 = 12.31.

AI explanation

First, find the principal using the simple interest formula P equals (SI * 100) / (R * T), giving (303.60 * 100) / (4 * 3) which equals Rs. 2530. The difference between compound interest and simple interest for three years is given by the formula P * (R / 100)^2 * (3 + R / 100). Substituting the values gives 2530 * (0.04)^2 * 3.04, which equals 2530 * 0.0016 * 3.04 to result in a difference of Rs. 12.31.

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