Multiple choice

What is the difference between the compound interest and simple interest accrued on an amount of Rs. 12,000 at the end of three years @ 12% ?

  1. Rs. 539.136

  2. Rs. 602.242

  3. Rs. 495.248

  4. Rs. 488.322
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A Correct answer
Explanation

Simple interest = P × R × T = 12000 × 0.12 × 3 = Rs. 4320. Compound interest = P[(1+R)^T - 1] = 12000[(1.12)^3 - 1] = 12000[1.404928 - 1] = Rs. 4859.136. The difference is 4859.136 - 4320 = Rs. 539.136.

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