Multiple choice

What is the difference between the compound interest and simple interest accrued on an amount of 12000 at the end of three years at rate of 12%

  1. 539.136

  2. 602.242

  3. 495.248

  4. 488.322
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A Correct answer
Explanation

Simple interest for 3 years is 12000 * 0.12 * 3 = 4320. Compound interest is 12000 * ((1 + 0.12)^3 - 1) = 12000 * (1.404928 - 1) = 4859.136. The difference is 4859.136 - 4320 = 539.136.

AI explanation

For two years, the difference between compound interest (CI) and simple interest (SI) is calculated as Difference = P * (R/100)^2. For three years, the formula is Difference = P * (R/100)^2 * (3 + R/100). Substituting the given values gives Difference = 12000 * (12/100)^2 * (3 + 12/100), which simplifies to 12000 * 0.0144 * 3.12. Multiplying these values results in a difference of 539.136.

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