Multiple choice

The difference between simple and compound interest on Rs. 6000 for 1 year at 20% per annum reckoned half yearly is:

  1. 120

  2. 60

  3. 180

  4. 72
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

For 1 year at 20% compounded half-yearly, the rate is 10% per half-year for 2 periods. Amount = 6000 * (1.1)^2 = 6000 * 1.21 = 7260. Compound interest = 1260. Simple interest for 1 year at 20% = 6000 * 0.2 = 1200. Difference = 1260 - 1200 = 60.

AI explanation

The simple interest on Rs. 6000 at 20% for one year is calculated as 6000 multiplied by 20 divided by 100, equaling Rs. 1200. For compound interest reckoned half yearly, the rate becomes 10% per half year, so the amount is 6000 multiplied by 1.1 multiplied by 1.1, equaling Rs. 7260, making the compound interest Rs. 1260. The difference between the compound interest and the simple interest is 1260 minus 1200, which equals Rs. 60.

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