Multiple choice

Choose the correct answer from the alternatives given. The difference between simple and compound interest at the rate of 10% per annum on a sum of 1,000 after 4 years is

  1. $Rs. 64.10$
  2. $Rs. 31$
  3. $Rs. 32.10$
  4. $Rs. 40.40$
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A Correct answer
Explanation

For 1000 at 10% for 4 years, Simple Interest = 1000 * 0.1 * 4 = 400. Compound Interest = 1000 * (1.1^4 - 1) = 1000 * (1.4641 - 1) = 464.10. The difference is 464.10 - 400 = 64.10.

AI explanation

The simple interest after 4 years is 1000(10/100)(4) = Rs. 400, while the compound interest is 1000(1 + 10/100)^4 - 1000. Calculating the compound interest gives 1000(1.1)^4 - 1000 = 1464.10 - 1000 = Rs. 464.10. The difference between the two interests is 464.10 - 400, which equals Rs. 64.10.

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