Multiple choice

Sita invests Rs. 5,000 in a scheme that offers 8% per annum simple interest and Rs. 5,000 in another scheme that offers 8% per annum compound interest, both for 3 years. What is the difference in the amount of interest earned from both schemes?

  1. Rs. 94.76

  2. Rs. 96.66

  3. Rs. 98.56

  4. Rs. 99.65

  5. Rs. 100.56
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Simple interest = 5000 * 0.08 * 3 = 1200. Compound interest = 5000 * ((1 + 0.08)^3 - 1) = 5000 * (1.259712 - 1) = 1298.56. The difference is 1298.56 - 1200 = 98.56.

AI explanation

The simple interest on Rs. 5,000 at 8% for 3 years is calculated as 5000 multiplied by 0.08 and then by 3, giving Rs. 1,200. The compound interest is found by subtracting the principal from the total amount, which is 5000 multiplied by 1.08 raised to the power of 3. This yields a total amount of Rs. 6,298.56, meaning the compound interest is Rs. 1,298.56. The difference between the two interests is 1298.56 minus 1200, which equals Rs. 98.56.

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