Multiple choice

Calculate the difference between the simple interest and the compound interest on Rs. $20,000$ in $2$ years at $8$% per annum compounded yearly.

  1. Rs. $256$
  2. Rs. $128$
  3. Rs. $164$
  4. Rs. $244$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest for 2 years at 8% is 16% of 20,000, which is 3,200. Compound interest is 20,000 * (1.08^2 - 1) = 20,000 * 0.1664 = 3,328. The difference is 3,328 - 3,200 = 128.

AI explanation

Using the direct formula for the difference between compound interest and simple interest for two years, the difference equals Principal multiplied by Rate squared, divided by 10000. Substituting the given values, we get 20000 multiplied by 8 squared, divided by 10000, which simplifies to 20000 multiplied by 64 divided by 10000. This calculation yields 128, meaning the difference is Rs. 128.

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