Multiple choice

What will be the difference between simple and compound interest on Rs. 8.000 at the rate of 5 percent per annum at the end of 3 years?

  1. Rs. 61.00

  2. Rs. 122.00

  3. Rs. 91.50

  4. Rs. 152.50
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A Correct answer
Explanation

For Rs. 8000 at 5% for 3 years, simple interest is Rs. 1200. Compound interest is Rs. 8000[(1.05)^3 - 1] = Rs. 1261, so the difference is Rs. 61.

AI explanation

For a time period of 3 years, the difference between compound interest and simple interest is given by Principal times Rate squared times (300 plus Rate) divided by 100 cubed. Substituting the given values gives 8000 times 5 squared times 305 divided by 1000000. Calculating this results in 8000 times 25 times 305 divided by 1000000, which equals Rs. 61.

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