Multiple choice

The difference between the simple interest and the compound interest on Rs. 1200 for one year at 10% per annum reckoned half-yearly is

  1. Rs. 2.50

  2. Rs. 3

  3. Rs. 4

  4. Rs. 3.75
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest for 1 year at 10% is 120. Compound interest compounded half-yearly at 10% per annum (5% per half-year) for 1 year is 1200 * (1.05)^2 - 1200 = 1200 * 1.1025 - 1200 = 123. The difference is 123 - 120 = 3.

AI explanation

The simple interest on Rs. 1200 at 10 percent for one year is 1200 multiplied by 10 multiplied by 1 divided by 100, which equals Rs. 120. Reckoned half-yearly, the compound interest is calculated using a rate of 5 percent for two periods, giving an amount of 1200 multiplied by the square of 1.05, which is Rs. 1323. The compound interest is 1323 minus 1200, equaling Rs. 123, so the difference between the compound interest and the simple interest is Rs. 3.

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