Multiple choice

What is the approximate difference between simple interest and compound interest, interest being compounded half yearly, for a period of one year on a sum of 8,000 at 12% per annum?

  1. Rs 24

  2. Rs 7

  3. Rs 29

  4. Rs 0
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Principal = 8000, Rate = 12% p.a. Simple interest for 1 year = 8000 * 0.12 = 960. Compound interest (half-yearly) = 8000 * (1 + 0.06)^2 - 8000 = 8000 * (1.1236 - 1) = 8000 * 0.1236 = 988.8. Difference = 988.8 - 960 = 28.8, which is approximately 29.

AI explanation

The simple interest on 8000 at 12 percent for one year is 8000 * 0.12 = 960. For half-yearly compounding, the rate becomes 6 percent and the formula Amount = P(1 + R/100)^n gives 8000 * (1.06)^2 = 8000 * 1.1236 = 8988.80, resulting in a compound interest of 988.80. The difference is 988.80 - 960 = 28.80, which rounds to 29. The result is Rs 29.

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