Multiple choice

What is the difference between simple interest and compound interest on Rs. 10,000 for two years at 20% per annum compounded half-yearly?

  1. Rs. 842

  2. Rs. 756

  3. Rs. 641

  4. Rs. 542
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For 10,000 at 20% compounded half-yearly for 2 years (4 periods at 10%), the amount is 10000 * (1.1)^4 = 14641. Compound interest is 4641. Simple interest for 2 years at 20% is 10000 * 0.2 * 2 = 4000. The difference is 641.

AI explanation

For the simple interest, the amount is 10000 * 20 * 2 / 100 = 4000. For the compound interest compounded half-yearly, the rate is 10% per half-year for 4 periods, giving an amount of 10000 * (1.10)^4 = 14641, so the compound interest is 14641 - 10000 = 4641. The difference is 4641 - 4000, which equals 641. The result is Rs. 641.

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