Multiple choice

Find the difference between the simple interest and the compound interest on Rs.7500 @ 12% at the end of the three years.

  1. Rs.366.96

  2. Rs.336.96

  3. Rs.366.36

  4. Rs.336.36

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple Interest = P × R × T = 7500 × 0.12 × 3 = Rs. 2700. Compound Interest = P(1 + r)^t - P = 7500(1.12)³ - 7500 = 7500 × 1.404928 - 7500 = Rs. 3036.96. Difference = 3036.96 - 2700 = Rs. 336.96. The key difference is compound interest earns interest on interest.

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