Multiple choice

If the principal is Rs. 8000 and the rate is 20% per annum, what will be the difference between simple interest and compound interest in 1 year if the interest is compounded quarterly?

  1. 121.63

  2. 126.35

  3. 124.05

  4. 132.64
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Simple interest for 1 year at 20% on Rs 8000 = 8000×0.2×1 = Rs 1600. Compound interest compounded quarterly: rate per quarter = 20/4 = 5%, number of quarters = 4. CI = 8000×(1.05^4 - 1) ≈ 8000×(1.2155 - 1) ≈ Rs 1724.05. Difference = 1724.05 - 1600 = Rs 124.05.

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